
 




 
 
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
 
FORM
10-K
 
(Mark
One)
 
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For
the fiscal year ended:  March 31, 2024
 
or
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For
the transition period from                                  
to                              
 
Commission
file number:  001-41277
 
MODULAR
MEDICAL, INC.
(Exact
name of registrant as specified in its charter)
 
  Nevada   87-0620495  (State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.) 
 
  10470 Thornmint Road, San Diego, California   92127  (Address of principal executive offices)   (Zip Code) 
 
Registrant’s telephone number, including area code:  (858) 800-3500
 
Securities
registered pursuant to Section 12(b) of the Act:
 
  Title of each class   Trading Symbol(s)   Name of each exchange on which registered  Common Stock, par value $0.001 per share   MODD   The Nasdaq Stock Market, LLC 
 
Securities
registered pursuant to Section 12(g) of the Act:
 
(Title
of class)
 
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes
☐ No ☒
 
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
 
 
  Yes ☐ No ☒
 
Indicate
by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
 
 
  Yes ☒ No ☐
 
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). 
 
 
  Yes ☒ No ☐
 
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
  Large accelerated filer ☐  Accelerated filer ☐  Non-accelerated Filer ☒ Smaller reporting company ☒  Emerging growth company ☐    
 
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
 
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
 
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
 
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
 
  Yes ☐ No ☒
 
The
aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, based on the closing price
of the shares of common stock on the Nasdaq Stock Market on September 29, 2023 was $17,971,555.
 
The number of shares of the registrant’s common stock outstanding,
par value $0.001 per share, as of June 17, 2024, was 32,536,700.
 

 
 


 

 
ANNUAL
REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2024
 
TABLE
OF CONTENTS
 


Part
    I

Item 1.
Business
1

Item 1A.
Risk Factors
20

Item 1B.
Unresolved Staff Comments
36

Item 1C
Cybersecurity
36

Item 2.
Properties
36

Item 3.
Legal Proceedings
36

Item 4.
Mine Safety Disclosures
36

 
 
 

Part
    II

 
 
 

Item 5.
Market for Registrant’s
    Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
37

Item 6.
Reserved
38

Item 7.
Management’s Discussion
    and Analysis of Financial Condition and Results of Operations
38

Item 7A.
Quantitative and Qualitative
    Disclosures about Market Risk
42

Item 8.
Financial Statements
    and Supplementary Data
F-1

Item 9.
Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure
43

Item 9A.
Controls and Procedures
43

Item 9B.
Other Information
44

Item 9C.
Disclosure Regarding
    Foreign Jurisdictions that Prevent Inspections
44

 
 
 

Part
    III

 

Item 10.
Directors, Executive
    Officers and Corporate Governance
45

Item 11.
Executive Compensation
51

Item 12.
Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder Matters
56

Item 13.
Certain Relationships
    and Related Transactions, and Director Independence
58

Item 14.
Principal Accountant
    Fees and Services
58

 
 
 

Part
    IV

 

Item 15.
Exhibits
59

Item 16.
Form 10K Summary
60

 
Signatures
61

 

i
 

 
FORWARD-LOOKING
STATEMENTS
 
This
Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), that relate to future events or to our future operations or financial performance. Any forward-looking
statement involves known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by
such forward-looking statement.
 
Words
such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “forecast,”
“intend,” “may,” “plan,” “potential,” “predict,” “project,” “targets,”
“likely,” “will,” “would,” “could,” “should,” “continue,” “scheduled”
and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words. Although we believe that we have a reasonable basis for
each forward- looking statement contained in this report, we caution you that these statements are based on our estimates or projections
of the future that are subject to known and unknown risks and uncertainties and other important factors that may cause our actual results,
level of activity, performance, experience or achievements to differ materially from those expressed or implied by any forward- looking
statement. Actual results, level of activity, performance, experience or achievements may differ materially from those expressed or implied
by any forward-looking statement as a result of various important factors, including our critical accounting policies and risks and uncertainties
relating to:
 


 
●
our strategies, prospects,
    plans, expectations, forecasts or objectives;

 


 
●
our ability to achieve
    a marketable product (i.e., our insulin pump) and the costs and timing thereof;

 


 
●
acceptance of our product
    by our target market and our ability to compete in such market;

 


 
●
our ability to raise additional
    financing when needed and the terms and timing thereof;

 


 
●
our ability to expand,
    protect and maintain our intellectual property rights;

 


 
●
our future operations,
    financial position, revenues, costs, expenses, uses of cash, capital requirements, our need for additional financing or the period
    for which our existing cash resources will be sufficient to meet our operating requirements;

 


 
●
our analysis of the target
    market for our insulin pump;

 


 
●
our ability to obtain regulatory
    approvals and clearances relating to our insulin pump, including those of the United States Food and Drug Administration, or FDA;

 


 
●
regulatory developments
    in the United States and other countries;

 


 
●
the timing and costs of
    our obtaining all regulatory approvals and clearances identified immediately above;

 


 
●
our compliance with all
    applicable laws, rules and regulations, including those of the Securities and Exchange Commission, or SEC, and the FDA;

 


 
●
our ability to compete
    in the diabetes marketplace with larger and more substantial medical device companies;

 


 
●
general economic, business,
    political and social conditions;

 


 
●
our reliance on and our
    ability to retain (and if necessary, timely recruit and replace) our officers, directors and key employees and their ability to timely
    and competently perform at levels expected of them;

 


 
●
our ability to generate
    significant revenues and achieve profitability;

 


 
●
our ability to manage the
    growth of our business;

 


 
●
our commercialization,
    marketing and manufacturing capabilities and strategies;

 


 
●
our ability to expand,
    protect and maintain our intellectual property position;

 


 
●
the success of competing
    third-party products;

 


 
●
our ability to comply with
    regulatory requirements relating to our business, and the costs of compliance with those requirements, including those on data privacy
    and security;

 


 
●
the specific risk factors
    discussed under the heading “Risk Factors” set forth in this report; and

 


 
●
various other matters,
    many of which are beyond our control.

 
Our
fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Annual Report on Form 10-K, refers to the
fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ended March 31, 2024).
Unless the context requires otherwise, references to “we,” “us,” “our,” and the “Company”
refer to Modular Medical, Inc. and its consolidated subsidiary.
 

ii
 

 
PART
I
 
ITEM
1. BUSINESS
 
Overview
 
Modular Medical is a pre-revenue, medical device
company focused on the design, development, and commercialization of innovative insulin pumps using modernized technology to increase
pump adoption in the diabetes marketplace. Through the creation of an innovative two-part patch pump, we seek to fundamentally alter the
trade-offs between cost and complexity and access to the higher standards of care requiring considerable motivation that presently available
insulin pumps provide. By simplifying and streamlining the user experience from the initial introduction of the patient to our product,
prescription assistance, establishing insurance reimbursement, streamlined training and day-to-day use with strong clinical support, we
seek to expand the wearable insulin delivery device market beyond the highly motivated “super users” to expand the category
into the mass market. Our product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type
2 diabetes markets for those individuals requiring insulin.

 
Differentiation
 
We
believe that there are a number of shortcomings and issues with currently available insulin pumps that prevent a substantial number of
people who require insulin on a daily basis from choosing an insulin pump to treat their diabetes. We believe that, by tailoring our
insulin pump to address such factors, we can expand the scope and adoption rate of insulin pump usage. We believe that to achieve broader
market acceptance, an insulin pump must be easier to learn to use, be less time-consuming to operate, more intuitive to both patients
and physicians, and meet the standards for coverage by insurance providers so that co-payments required from patients are affordable
and the hurdles to insurance coverage are significantly reduced.
 
Among
the more prominent issues are:
 


 
●
Complexity:
                                            Many existing pumps are highly complex and require significant technical expertise to
                                            use effectively. We believe such pumps were designed for “super users,” who have
                                            high levels of motivation and technical competence. The complexity of pumps can be daunting
                                            to less technically inclined, less motivated users.

 


 
●
Cumbersome:
    We believe that a majority of existing pumps are bulky and difficult to manage, requiring a means of carrying the pump around and
    up to 48 inches of tubing to the injection site to connect the catheter to a pump. The tubing and the cartridge, which holds the
    insulin, must be replaced every few days.  This requires users to carry spare parts and other equipment adding to the difficulty
    of using the pump. In comparison, our product only requires a cartridge change every few days.

 


 
●
Cost:
    Costs associated with insulin pump therapy can be high and prohibitive, especially for those on fixed or limited incomes. These costs
    vary by pump and insurance coverage, but multi-thousand-dollar upfront payments, often with substantial co-payments in addition to
    possible additional co-payments on consumables, can easily place current pumps out of reach for patients. This leads to limited or
    absent reimbursement/coverage and potentially high financial hurdles for patients to gain access.

 
 
 

 
●
Outdated
    style: Consumer electronics devices have evolved in both form and function. Diabetes pumps have not experienced similar progress.
    We believe that consumers will be more receptive of products designed with the user experience in mind and that many have low tolerance
    for complex, difficult procedures for use and maintenance of products.

 
 
 

 
●
Pump
    mechanism limitations: Traditional pumps generally utilize a syringe and plunger mechanism to deliver insulin. We believe this
    design limits the ability to reduce the size of the pump, and also potentially exposes the user to the unintended delivery of the
    full volume of insulin within the pump, which can cause hypoglycemia or death. We believe that the fear of adverse health events
    due to technical malfunctions related to traditional pump mechanism limitations deters the adoption of insulin pump therapy.

 
Our
team has substantial knowledge of the diabetes industry and experience in developing, obtaining marketing authorization for, and bringing
insulin pumps to market. Based on this experience, we believe that our innovative insulin pump, using a new and proprietary method of
pumping insulin, can address most or all of these shortcomings. It provides a state-of-the-art insulin pump capable of both basal (steady
flow) and bolus (mealtime dosing) insulin disbursement. It also has been designed considering a natural migration path to multi-chamber/multi-liquid
pumps, potentially offering an exciting array of new therapies to patients with diabetes and other conditions.
 


1
 

 
Our
goal is to become the leader in expanding access to insulin pump technology to a wider portion of diabetes sufferers and provide not
just care for the super users, but “diabetes care for the rest of us.” While our initial target market is people with type
1 diabetes, we believe there is a substantial opportunity to penetrate the type 2 marketplace, whether through our initial MODD1 pump
or further simplification of our pump to address the type 2 marketplace.
 
The
MODD1 is a high-precision pump that we believe represents the best choice for new pump patients because it is easy to afford, easy to
learn, easy to use, and has a revolutionary design and internal technology that enable precision with low-cost manufacture and high reproducibility.
 
Key
features include:
 


 
●
Two parts - one reusable,
    one disposable - snap together to form the working system;

 


 
●
One button interface, easy
    to learn and use;

 


 
●
90-day reusable, 3-day
    disposable;

 


 
●
Disposable portion removable
    at any time from an adhesive-backed retainer, which remains in place;

 


 
●
No external controller
    required, no charging, no battery replacement; and

 


 
●
Slim profile, lighter weight.

 
A
proprietary survey of American healthcare payors representing 50 million covered lives (approximately 1/3 of U.S. covered lives) performed
for us by industry leading survey firm ISA in 2019 has demonstrated that payors are willing to grant equivalent or preferential coverage
for a product with this feature set at launch in exchange for discounts of approximately 20%.
 
Diabetes
Classifications and Therapies
 
Diabetes
is typically classified as either type 1 or type 2:
 


 
●
Type 1 diabetes, or T1D,
    is an auto-immune condition characterized by the body’s nearly complete inability to produce insulin. It is frequently diagnosed
    during childhood or adolescence, although it can sometimes have onset in adulthood. Individuals with T1D require daily insulin therapy
    to survive.

 


 
●
Type 2 diabetes, or T2D,
    represents over 90% of all individuals diagnosed with diabetes and is characterized by the body’s inability to either properly
    utilize insulin or produce sufficient insulin. Initially, many people with T2D attempt to manage their condition with improvements
    in diet and exercise and/or the use of oral medications and/or injection of glucagon-like peptide-1 (GLP-1) drugs. However, as their
    diabetes advances, patients often progress to requiring insulin therapies such as once-daily long-acting insulin and ultimately to
    intensified mealtime rapid-acting insulin therapy. This represents an important portion of the diabetes market with an estimated
    1.6 million individuals with T2D intensively treated with insulin currently in the United States.

 
Glucose,
the primary source of energy for cells, must be maintained at certain levels in the blood in order to permit optimal cell function and
health. The brain works on pure glucose, and, when sufficient glucose is available, the brain allows insulin to be released that allows
the cells to absorb glucose. In people with diabetes, blood glucose levels are not well controlled by the brain due to the shortage of
insulin. Frequently, blood glucose levels become very high, a condition known as hyperglycemia, or very low, a condition called hypoglycemia.
Hyperglycemia can lead to serious long-term complications, including blindness, kidney disease, nervous system disorders, occlusive vascular
diseases, lower-limb amputation, stroke, cardiovascular disease, and death. Hypoglycemia can lead to confusion or loss of consciousness,
often requiring a visit to the emergency room or, in certain cases, result in seizures, coma, and/or death.
 
All
people with T1D, which is our primary market, require daily insulin. According to the Seagrove 2021 Diabetes Blue Book, approximately
18% of people with T2D in the United States, or approximately 4.7 million people, require insulin (basal alone represent 3.1 million
and basal plus mealtime represent 1.6 million) to manage their diabetes. In this Report, we refer to people with T1D and people with
T2D who require mealtime insulin as “insulin-requiring people with diabetes.”
 

2
 

 
Currently,
there are two primary therapies available for insulin-requiring people with diabetes: multiple daily insulin injections directly into
the body through syringes or insulin pens (a type of syringe), referred to as Multiple Daily Injection, or MDI therapy, or the use of
an insulin pump to deliver mealtime insulin boluses to help with glucose absorption after carbohydrate consumption and a continuous subcutaneous
insulin infusion, or CSII therapy, into the body. Generally, CSII therapy is considered to provide a number of advantages over MDI therapy,
primarily an improvement in glycemic control, as measured by certain diabetes management tests such as hemoglobin A1c (HbA1c) measure
and more recently Time in Range (TIR) where a continuous glucose measuring device is used to calculate this test. Among other clinical
benefits, a study conducted by Tandem Diabetes Care, Inc., or Tandem, in 2021 demonstrated that insulin pump use can decrease glucose
variability, reduce the number of hypoglycemia events, and reduce the fear of hypoglycemia.
 

Notwithstanding these advantages, we believe the
difficulty in use resulting from the complexity and cumbersome design of available insulin pumps, as well as high and often prohibitive
costs for both the patient and insurance provider, has resulted not only in dissatisfaction among many existing pump users. As noted in
a Seagrove Partners 2021 study, fewer than half of first-time pump users purchase a new pump after the warranty expires. We believe the
cost and complexity to the user has severely limited the adoption rate of insulin pumps by a large segment of the diabetes population
using MDI therapy, whom we refer to in this Report as “Almost Pumpers.”
 
We
define Almost Pumpers as insulin-requiring people with diabetes who are aware of pumps and their potential benefits but because of past
experiences, pump shortcomings, cost, complexity, and time and learning required to adopt and utilize currently available insulin pumps,
continue to receive their daily insulin through MDI therapy. We undertook one-on-one interviews with over 200 of these individuals to
understand their past experiences on or considering pumps, existing pump shortcomings, the cost and insurance challenges, complexity
to learn and time and complexity to operate that drives them to remain on MDI. With this detailed understanding, we brought a series
of prototype models to them to react to, so we could refine the design and include features that would motivate them to be able to use
this technology to better care for their diabetes. Our MODD1 pump has been well received by these individuals and our clinical advisors,
as applicable for this sector of the marketplace.
 
Our research, along with marketplace data provided
by Seagrove Partners in 2023, estimates that 33% of Americans with T1D have an insulin pump and 28% of Americans with T1D (44% of those
who currently utilize MDI) can be classified as having an interest in pump adoption and meeting the American Diabetes Association guidelines
of glucose control if their objections to the currently available suite of products can be overcome. They do not want to closely manage
their glucose levels and incur the associated time and effort involved; however, they understand, or are advised by their clinical care
team, that they need to do more to achieve a reasonable level of glucose. They are the Almost Pumpers. We have developed what we believe
to be the most technologically advanced delivery system overcome the objections and provide motivation for this market. We believe that
there are four addressable hurdles to adoption:

 


 
●
Usability: the device needs
    to be easy to learn and to operate;

 


 
●
Affordability: we will
    focus on overcoming copay and insurance hurdles rather than leaving the “insurance journey” to the clinician and patient;

 


 
●
Accessibility and Education:
    we will seek to engage patients to sample this new technology by supplying clinicians with free samples and simple training to allow
    people to see first-hand the typical barriers to adoption that have been overcome; and

 


 
●
Service and Support: where
    we will answer their questions and concerns during this diabetes experience.

 

We believe this conversion process, engaging people
to try and thereby receive the benefits of our technology will substantially increase adoption of insulin pumps among with patients with
T1D and T2D who remain reliant upon multiple daily injections. Diabetes is a disease that appears randomly throughout the world. Therefore,
we cannot segment the market by socioeconomics, education or level of care. We intend to create an insulin pump that appeals to all Almost
Pumpers.
 
Market
 

The International Diabetes Federation estimated
that, in 2021, approximately 537 million people were living with diabetes worldwide, and by 2045, this number will increase to approximately
783 million people.
 
An
estimated 34 million people in the United States live with diabetes. Within this group, T1D accounts for approximately 1.8 million people
with the remainder being T2D. All people with T1D require daily insulin. However, of the approximately 32.2 million people with T2D,
about 1.6 million of them require MDI therapy to manage their diabetes. This represents a large and growing market with the effects of
diabetes accounting for roughly 25% of all healthcare dollars spent annually in the United States.
 

3
 

 
According
to the National Diabetes Health Care Provider Survey conducted by Seagrove Partners, LLC in 2021, approximately 25% of the 1.6 million
highly insulin intensive individuals with T2D have considered going “on pump.”
 
Insulin
pumps have been shown to provide a higher level of care for insulin-dependent people with diabetes and result in better glycemic control,
fewer comorbidities, fewer trips to the emergency room, and higher overall quality of life. They also result in lower overall costs to
the healthcare system, reducing typical expense per patient year from approximately $27,000 to $17,000.
 
Despite
these benefits, only 1 in 3 (33%) of the 1.8 million Americans with T1D and very few of the 1.6 million T2D intensively treated with
insulin currently use an insulin pump, for a total of approximately 670,000 current users, with only a slow increase of insulin pump
use. The remaining 68% of individuals with T1D and virtually all with T2D rely on MDI therapy for glucose control. Decades of advances
in technology advances have left these non-pumpers at a significant disadvantage from a control perspective versus their “pumping”
counterparts.
 
We
have identified a large segment of the market that we refer to as “Almost Pumpers.” Almost Pumpers are those insulin-requiring
people with diabetes (T1D or T2D) who feel that they would adopt the pump if it were less expensive, less time consuming, less technically
intimidating, and if there was no separate controller. We believe that they represent approximately 32% of the T1D market correlating
to a $1.9 billion growth opportunity.
 
Insulin
pumps on the market today require a substantial amount of time to manage the therapy, have high out-of-pocket costs that place these
technologies out of reach for a large part of the population, and are feature-heavy with complex systems, which we believe have hampered
adoption and intimidated many users. The most commonly used insulin pumps today require extensive training and hours of daily management.
The average pump user must go through 42 steps of setup and refill process every 72 hours to “stay on track.” Our product
only requires nine steps for setup and refill every 72 hours.
 
 
 
The
current reluctance to adopt the insulin pump has had serious consequences on the healthcare system. In the United States, people living
with T1D have struggled to attain glycemic targets. A 2019 analysis of the large T1D Exchange clinical registry found that only 21% of
U.S. adults with T1D achieved the ADA A1c goal (<7.0%). Further, according to a study published in JAMA Internal Medicine, researchers
found no significant improvements in diabetes care between 2005 and 2016, with persistent gaps in care related to socioeconomic status.
 
Another transition in the care of diabetes is
the measuring of glucose from finger-stick tests to continuous glucose monitoring, or CGM, sensors, which are wearable devices. These
sensors are placed under the skin and give a reading every five minutes of the user’s glucose level. While Dexcom has been a market
leader in this field, the introduction and rapid adoption of the Freestyle Libre by Abbott Labs has made CGM easier and more affordable,
expanded the product category, and doubled the market size. The Freestyle Libre product is a more affordable, easier to use and smaller
version of the popular Dexcom, Inc. (Dexcom) CGM product. Now, for the first time, there is an easy, less painful, i.e., no more finger
sticks, way for patients to have the data they need to understand more about their glucose levels and their insulin requirements. Access
to such data has motivated patients to ask their diabetes clinician how they can achieve better glycemic control and made them more comfortable
with using technology and wearables to treat their diabetes. Pumps offer a clear pathway to better control and better overall care. We
believe that the insulin pump market is ready for a similar transition as that experienced in the CGM space. Our MODD1 pump represents
a new and better offering to assist and induce a wide variety of patients to make the transition and overcome the objections to superior
control by becoming a “pumper.”
 


4
 

 
We believe the present pump marketplace is approximately a $1.9 billion
market, comprising 33% of T1D pumpers and a small group of T2D pumpers. Seagrove Partners surveyed clinicians, and, in its 2021 report,
estimated that 28% of T1D patients and 25% of T2D patients would adopt technology that was easier to use, learn and access and eligible
for insurance reimbursement. We believe this represents a total addressable market of approximately $3 billion for us, assuming cartridge
revenue of approximately $4,100 per patient, per year. We expect to spend approximately 15% of our total revenue on discounts and free
samples to encourage adoption of our pump product. 
We
are dedicated to helping all people with diabetes gain access to high quality care. We aim to help people with diabetes - especially
Almost Pumpers and the historically underserved communities - gain access to insulin pump technology by making it affordable and easy
to use.
 
Diabetes
Care is at an Inflection Point
 
We
believe that the insulin pump market stands at a crossroads as a confluence of events makes the timing for a new product introduction
ideal.
 
2020
was a very difficult year in diabetes. Between COVID-19 and a loss of glycemic control during quarantines and isolation, deaths from
diabetes rose by 17% in 2020 versus the prior year. This was sharpest among the young who saw deaths rise 29% in the 25-44 year old demographic.
This became a pain point and a desire to find new and better solutions and has raised awareness among patients, caregivers, payors, and
policy makers.
 
COVID-19
also encouraged (and required) trial and adoption of telehealth models and a great many people have found them to their liking with a
high proportion of patients and of health care providers (HCPs) that want to continue to use these technologies. We expect much of this
shift and newfound comfort with distance care models to persist and believes that this can provide a patient acquisition and engagement
model for insulin pumps and diabetes care, especially for pumps optimized for free trial and easy learning.
 
At
the same time, reimbursement for patch pumps has been increasingly moving to a pharmacy benefits manager (PBM) model, which simplifies
reimbursement and will further aid in a “frictionless launch.” This represents a fundamental shift in the insulin pump market,
making onboarding rapid and simplifying a previously complex and time-consuming “insurance journey.”
 
We
believe these CGM device users are increasingly interested in adopting technology and wearables to manage their diabetes. We believe
CGM device users are a natural market for a new type of pump, if it can meet their needs and address their objections and that the conjunction
of the above trends represents a unique opportunity in the insulin pump market’s history. The CGM device provides glucose-level
data, and, as necessary, the user can respond to address any issues with a simple button push on a pump to deliver their insulin versus
taking out a syringe and injecting glucose.
 
Diabetes
technology companies understand that we are at a turning point with new markets (T2D, T1D that are currently not using technologies).
This can be seen with increased discussion around this topic during recent national diabetes conferences, as well as an increase in marketing
promotion.
 
All
these recent changes support the high proportion of T1D and T2D intensively treated with insulin that we consider to be Almost Pumpers,
and we expect the number of Almost Pumpers to grow in the coming years and be more reachable with appropriate marketing strategies.
 
Our
Insulin Pump
 
Instead
of building complex, bespoke, and difficult to manufacture and maintain pumping and control systems, we began with the technology and
the user in mind. Using proprietary methods of insulin measurement, we were able to eschew complex mechanisms and instead built a product
candidate using only parts from high volume consumer electronics manufacturing lines, breaking the cost vs functionality curve that has
existed in the insulin pump space and representing the first truly modern insulin pump design. We consider this to be a new kind of product
for a new kind of patient.
 
In January 2024, we submitted a 510(k) premarket
notification to the United States Food and Drug Administration (“FDA”) for our MODD1 insulin pump. In March 2024, we received
comments from the FDA on our submission, and we are in the process of responding to those comments. A good part of our focus has shifted
to managing the process of preparing to move our initial production line to our manufacturing partner, Phillips-Medisize, a large tier-one
medical device manufacturer, which will manage and operate our production to produce products for human use. We believe that Phillips-Medisize
will be able to rapidly scale to higher volumes at lower cost. We continue to devote substantial time and resources, including exhibiting
at major diabetes conferences, to better understand the needs and preferences of Almost Pumpers and the specific patient/provider/payor
requirements to motivate change from MDI therapy. By making the bolus delivery at meals simple, we believe we will drive improved health
outcomes. 

5
 

 
MODD1
has several distinguishing features:
 
 
1
- The pump has a simple button to press to deliver insulin as the patient requires it. The electronic pump uses a simple motor for
rotating a cam to motivate the insulin into the patient along with a low power Bluetooth and near-field communication (NFC) chips to
optionally allow the patient to communicate with their smart phone, tablet, or other mobile computing platform. Our mobile device
application is included in our 510(k) submission and will be a part of our introductory product.
 
2
- The pump snaps together with a three-day disposable cartridge that is patient filled with insulin for delivery. It includes a simple
coin cell that allows it to run through the 80-hour life of the cartridge.
 
3 - The infusion set contains a soft 6 mm cannula and an introducer
for insertion into the skin for insulin delivery, and it automatically removes the inserted needle used to transfer insulin to the body. 
MODD1 comes with a variety of methods for the
patient to wear the pump. Options include: a base plate with adhesive for attaching to the body that has features for holding the pump
to the patient; overwraps to hold the product to the patient; and a velcro strap with a base plate suitable for wrapping around the arm
or leg of the patient. 
The system will deliver a small continuous rate
called a basal that will provide approximately 50% of the total daily dose required, and the user will use the on-pump button to administer
boluses, typically before and after meals. The objective is to make the product simple to acquire and take home, simple to learn and most
importantly, simple to use and live with, to expand the pump market, drive adoption and ultimately better clinical outcomes.
 
Technological
Advantages
 
The adoption of new ultra-high volume technologies
will result in far easier manufacturing scale up, as parts sourcing and assembly processes are far easier. The MODD1 was designed from
the beginning for mass manufacturing, and we have partnered with a manufacturing partner, Phillips-Medisize, a Molex company, to establish
processes and “lights out” or near lights out production assembly lines whereby a minimal number of workers will be required
in the production facility. This advantage is compounded by the high availability and already optimized cost reduction in its components.
When we achieve production scale, we believe this should result in a cost of goods for MODD1, estimated on the competitors’ announced
margins and sales, of approximately 50% lower than our closest patch pump competitor.

 

6
 

 
The
adoption of modern, miniaturized technologies has led to numerous other advantages, as well. For example, our MODD1 pump is smaller in
overall volume than Insulet’s popular Omnipod product and has a lower profile to the skin. Despite this, the MODD1 holds a full
3 milliliter, or mL, (300 units) of insulin, in line with full sized pumps such as those offered by Tandem and Medtronic, 50% more than
the 2mL reservoir in the Omnipod. We believe that this volume advantage over other patch pumps will be significant as 24% of type 1 and
over 50% of the rapidly growing type 2 market require more than 2mL of insulin every three days (the expected wear time of patch pumps).
 
In addition, our new pumping modality will provide
what we believe is the most even (and thus closest to the function of a healthy pancreas) delivery of basal insulin in the industry.
We intend to demonstrate the impact of our system on glycemic control in a clinical study specifically focused on improved adherence,
more bolus deliveries per day and providing the clinicians with clear data on patient use. 
The
technology allows the patient to simply add insulin and operate. The battery is included in each cartridge, and the device is operated
without a controller. As a result, no charging is required. MODD1 has also been made push-button simple to deliver insulin to appeal
to a wider audience of users.
 
This new technology has made the MODD1 lighter
than existing offerings. Compared to the Insulet Omnipod, MODD1 weighs 20 grams (vs. 26 grams) empty and 23 grams (vs. 28 grams) fully
filled (despite carrying 50% more insulin), reductions of 23% and 18%, respectively. Also, unlike existing patch pumps, the MODD1 can
be removed from the needle and taken off and replaced later if the user desires. This avoids loss of insulin in a pump due to accidental
dislodging of the soft canula, an issue for other patch pumps with which users have expressed considerable dissatisfaction. 
Our approach to the care of diabetes can be further
enhanced by leveraging the MODD1 single-pumping chamber technology and reusable pump approach to apply to dual (or more) chamber pumping
solutions. We believe that such multi-chamber pumps will be integral to the realization of high time-in-range artificial pancreas solutions
that require no human intervention because of the application of, for instance, drugs to raise glucose levels coupled with drugs to lower
glucose. They will be the next step forward from the cumbersome and awkward solutions today that require the user to announce meals,
count and input carbohydrates, and adjust delivery for exercise and sleep to prevent overdosing of insulin. Instead, if a user overdosed
insulin, the user would simply pump in a drug to release sugar stores to raise it up. We believe that a pre-filled peel and stick patch
pump with the ability to function in a fully autonomous closed loop system with a CGM device, which is measuring and transmitting glucose-level
information, represents the next generation of diabetes care. We believe that we have demonstrated our technology and have secured, and
will continue securing, intellectual property protection on our approach. 
We
believe this technology, especially applied in a dual chamber capacity, will open up numerous applications outside of diabetes where
medication compliance of complex therapy regimes is difficult. Example applications would include weight loss, fertility, and simplifying
the delivery of complex multi-drug cocktails, especially those with diverse and challenging dosing schedules.
 
Our
Solution
 
Our
proposed pump has been designed and developed to address the aforementioned shortcomings of the existing pump market and to appeal to:
(i) the substantial group of Almost-Pumpers, who may be interested in using an insulin pump, but have not done so because of the complexity,
cost or cumbersome nature of existing products and (ii) people who are using one of the currently available insulin pumps but are dissatisfied
with such products. We believe that, owing to our new proprietary technology, our proposed insulin pump will be the simplest and least
expensive product on the market and the easiest for providers to prescribe.
 
Our
current pump has been built to test what we believe to be our novel approach to insulin pumps. By providing a pump that we believe will
establish industry standards in terms of technology, simplicity to understand, ease of use and price, we believe our MODD 1 pump will
offer the vast majority of benefits afforded by more expensive and complex pumps, but it will remain accessible to a substantially greater
percentage of diabetes sufferers requiring daily insulin therapy.
 
We believe people generally will not use technology
that intimidates them, especially for a life-sustaining therapy. In addition, we believe that physicians are hesitant to prescribe such
technology due to the level of training and support required with the present pump product offerings. It is our belief that broadly-needed
medical products, such as is intended with our proposed pump, must be user-friendly and affordable. We believe this approach is fundamentally
different from that applied to the existing pump market today, where most pumps are continuously adding complex features appealing to
super users and leaving the other people with diabetes further behind. 
Our
current goal is to successfully design, develop and obtain all required regulatory approvals for our proposed insulin pump, and, thereafter,
commercialize the finished product. Our long-term goal is to become a leading provider of insulin pump therapy by focusing on both consumer
and clinical needs.
 


7
 

 
To
achieve our above stated immediate and current goals, we intend to pursue the following business strategies:
 


 
●
Use of innovative
    proprietary technology.

 
Based
on the substantial experience of Paul DiPerna, our President, Chief Financial Officer, Treasurer and Chairman of our board of directors,
in engineering design and innovative technology in the medical device industry and, in particular, with the invention, market vision
and technical development of insulin pumps, we have generated proprietary technology that has been incorporated into our proposed insulin
pump. We believe this technology allowing for a two-part, yet small enough to wear, pump product, along with simplified mechanics for
pumping, has greatly assisted us in creating a simpler, user-friendly pump. We believe the completed design, engineering and technology
being incorporated into our pump will make it substantially simpler and more affordable than those currently available. These features,
together with the safety and reliability of our proposed pump, are designed to create the next generation of insulin pumps that will
feature important and well-differentiated attributes compared to those currently available and make it available to consumers across
mostly all socioeconomic groups in the United States and around the world.
 


 
●
Keep costs low during
    our design and development process.

 
To
attempt to ensure that we have sufficient funds to design, develop, and obtain all required regulatory approvals for our proposed insulin
pump without having to sacrifice quality and efficiency, we intend to maintain a tight budget and limit expenditures where possible.
We believe this will be possible because of the extensive knowledge and experience of Mr. DiPerna, not only in the diabetes industry
and more specifically in the insulin pump device market, but also his experience in designing and developing insulin pumps and other
medical devices and his ability to manage a small, focused development team. We currently expect that various other expenses, such as
sales and marketing costs, will not be incurred until such time as regulatory clearances are obtained.
 
Commercialization
Strategy: Overcoming the Insurance Hurdles
 
Our
goal is to establish MODD1 as the best option for new pump patients as we expand the market into the Almost Pumpers (Type 1 and Type
2) and newly motivated CGM users. We seek to grow the market by providing first-line insulin pump therapy that is well suited to meet
the needs of both diabetes patients requiring insulin and their clinicians.
 


 
●
We believe that MODD1 is
    approximately 50% less expensive to manufacture than Omnipod. This low cost allows us to spend more on patients and sampling. We
    believe that this will save money for payers because we expect to offer the pump with no upfront cost to patients. Expected benefits
    of MODD1 include:

 


 
o
20% discount vs Insulet
    will drive preferred status;

 


 
o
Designed to use pharmacy
    benefit manager, or PBM, codes as a disposable;

 


 
o
No new code needed to be
    reimbursed at launch because MODD1 will be able to use existing U.S. Center for Medicare and Medicaid Services, or CMS, codes; and

 


 
o
Saves insurance provider
    an estimated $1,062 per patient per year vs Omnipod, as we will offer providers discounts from the existing reimbursement code.

 


 
●
The MODD1 will be sampled
    and given to patients by a doctor or diabetes nurse educator at the time of the patient visit. When a patient is motivated to make
    change, our starter kit will make it easy for the clinician to initiate the new therapy with training and appropriate supplies that
    same day. We seek to eliminate the currently challenging “insurance journey” and product acquisition timeline and significantly
    reduce training time for the busy clinician, which we believe are all major hurdles to pump adoption. We intend to add significant
    telehealth support to help the patient throughout adoption and use and to facilitate greater collaboration between patients and their
    physicians.

 

8
 

 
Europe
represents another large potential market for MODD1, as approximately 60 million people in Europe live with diabetes. Approximately $161
billion is spent annually on diabetes healthcare costs in Europe based on data from a Seagrove Partners 2023 study. At present, cost
containment is restricting pump uptake across Europe. Current pump usage hovers between 10% and 20% in many markets. Single payor healthcare
systems across Europe traditionally attempt to contain costs in the short term and seek low price technologies with moderate medical
benefits. We anticipate MODD1 will offer a rebalance of this risk/reward strategy in that payors will incur only minor incremental short-term
costs with the benefit of longer -term cost savings associated with reliable pump use. We intend to employ a partnership strategy across
Europe following in-house managed regulatory and pricing activities in the major markets (e.g., UK) and more cost receptive markets (e.g.,
Nordics). We have begun the approval process for Europe and are targeting European and United Kingdom approval towards mid 2025.
 
Marketing
 
MODD1
tackles the most significant barriers to pump use-access and affordability-and makes it easier for clinicians, caregivers and individuals
to manage diabetes care. We believe that MODD1 will be the only insulin pump that patients can take home immediately from the doctor’s
office. Our commercialization plan will drive adoption and is designed to expand the market and is intended to do the following:
 


 
●
Maximize adoption with
    a comprehensive frictionless launch program. We will seek to decrease the level of reimbursement effort and cost to encourage
    health care providers, or HCPs, to offer our pumps and encourage patient trials. Our product reduces the technical hurdles to widen
    appeal, encourage new starts and increase adherence. We will encourage patients utilizing MDI therapy to make the switch to the pump
    earlier in their treatment, ideally right at diagnosis. For those who want or need more control, a key point is that a simple button
    push to administer insulin is much easier than delivering an injection.

 


 
●
Leverage technology
    to support sales and new patient acquisition. We intend to set up technology-enabled sales teams backed with a full omnichannel
    program to drive awareness and trial with HCPs and patients. We will focus on educating providers that our product candidate is simple
    to teach and easy to support making it an ideal front line offering.

 


 
●
Facilitate patient trials.
    To facilitate patient trials, we intend to:

 

oProvide
                                            a free sample pump, insurance verification, co-pay coupons and telehealth support, as may
                                            be allowed under federal and state law, to patients thereby reducing outlay of time and money;
                                            and

 

oPartner
                                            with multiple educational and pharmacy channels to support rapid adoption and support of
                                            patients.

 


 
●
Leverage MODD1 300-unit chamber to increase adoption with Type 2 patients. We believe MODD1 has a major advantage over existing patch pumps in that the chamber carries enough insulin to meet the high doses many Type 2 patients need. We intend to promote this advantage and capture a significant share of the existing Type 2 pump users, as well as new starts.

 


 
●
Work with key organizations and policy makers to pave the way for greater access to pumps. We will promote MODD1 technology among the underserved, who are typically low users of health technology. We will identify individuals, patient organizations, professional societies, and policy and diversity and inclusion organizations that are critically important to the adoption of new technologies in the diabetes space and build relationships with these influential stakeholders.

 


 
●
Initiate a clinical
    study program (with key diabetes centers) We intend to provide additional clinical support for MODD1 in special patient types
    and clinical setting. After obtaining 510(k) clearance, we intend to conduct a soft launch and clinical research program in major
    markets to pave the way for the full launch, which is expected to commence in early 2025. We will work with our advisors and key
    diabetes associations to educate the community about the MODD1. In addition, we will conduct clinical studies to develop competitive
    claims and market expansion.

 


 
●
Work with major health
    plans to establish MODD1 as the first line pump for Type 2 patients. We believe MODD1 will be payor preferred for both Type 1
    and Type 2 patients. It was designed to attain preferential reimbursement and avoid the coverage pitfalls many other pumps have experienced.

 


 
o
Payors want an effective
    product whereby the users realize the clinical benefit. We intend to launch with a discount program for payors of 20% to drive uptake.

  


 
o
Designed to use existing
    PBM codes as a disposable

 


 
o
No new reimbursement code:
    Reimbursed at launch

 


9
 

  
Tie-in
with telehealth. 
 
In
recent years, telehealth has gone mainstream, and patients and providers have become comfortable with it. There are less than 4,000 patient-facing
endocrinologists in the United States. The treatment of diabetes will be significantly enhanced with telehealth to drive more volume
and clinical enhancements through their practices. Telemedicine is a force multiplier for a small group of doctors to better serve a
large market. MODD1 was designed to be affordable enough for free sampling and trial, and simple enough for self-guided user training.
We believe that by combining telehealth support with MODD1, we will decrease the burden of diabetes care and improve the lives of people
with diabetes.
 
 
 

10
 

 
Soft Launch
 
We intend to initiate a “soft launch” following FDA clearance
of the MODD1 device. Our plan is to select a group of clinicians who are well trained, experienced and have the support infrastructure
to take on initial patients and monitor them carefully to provide clinical feedback on our performance to further refine our product and
the support infrastructure prior to full commercial launch. Many of these clinicians will have been those who assisted in the development
of the MODD1 offering. 
We
intend to continue to modify, refine and finalize our system to best meet:
 


 
●
The general needs and preferences
    of our Almost Pumper target market based upon our knowledge of the diabetes industry and information available and/or obtained by
    us from Almost Pumpers and their caregivers; and

 


 
●
The general guidelines
    of third-party payors, private and public insurance companies, preferred provider organizations and other managed care providers
    with particular focus on the guidelines established by CMS, which administrates the United States Medicare program. To assist us
    in making such modifications and refinements, we have retained independent consultants to focus on ensuring that our product candidate
    satisfies the existing coverage and reimbursement criteria of such third-party payors.

  
Manufacturing
 
Our
pump product comprises the pump, a disposable cartridge that holds the insulin reservoir, a baseplate that affixes the pump product to
the user’s body and the infusion set, which includes a cannula to infuse the insulin into the body. We intend to manufacture the
pump, the cartridge and the baseplate and purchase the infusion set from third parties. Prior to shipment, our pump product will be packaged
with an infusion set. In connection therewith:
 


 
●
We have installed automation
    machines in our facility that will be capable of assembling the cartridges at a rate sufficient to supply 6,000 patients (60,000
    cartridges per month), and we are in the process setting up a second line to double this capacity.

 


 
●
Product packaging will
    initially be performed manually by our personnel, while the cartridge automation is being refined. We expect to purchase and implement
    packaging automation equipment as the second phase of automation of the cartridge.

 


 
●
The infusion sets will
    be purchased from a third-party supplier to cost-effectively introduce our product and focus on our core expertise.

 
We
have commenced working with Phillips-Medisize to prepare for the transfer to its facility. We expect to transfer the cartridge automation
equipment to this contract manufacturer in mid 2024 to verify and validate into its manufacturing process. Phillips Medisize would then
perform all manufacturing operations to ensure compliance with FDA regulations.
 
FDA
Clearance
 
The
FDA requires us to meet all applicable regulations for insulin pumps, a subcategory of infusion pumps, which are generally considered
Class II devices by the FDA. In January 2024, we submitted a 510(k) premarket notification to the FDA for our MODD1 insulin pump. In
March 2024, we received comments from the FDA, and we are in the process of responding to those comments.
 
Commercialization
Steps
 
To commercialize our product, we must successfully complete a number
of material steps, including:
  


 
●
Continue  to ensure it meets:

 


 
o
FDA requirements for 510(k) clearance, including taking such actions, if any, as may be required by the FDA as a condition to granting approval and providing 510(k) clearance for our insulin pump;

 


 
o
the general needs and preferences of our Almost-Pumper target market
based on our knowledge of the diabetes industry, information gathered from our soft launch and other information available and/or obtained
by us from Almost Pumpers and their caregivers; and

 

othe
                                            general guidelines of third-party payors, private and public insurance companies, preferred
                                            provider organizations and other managed care providers with particular focus on the guidelines
                                            established by the Center for Medicare and Medicaid Services, or CMS which administers the
                                            United States Medicare program, or Medicare. To assist us in making such modifications and
                                            refinements, we have retained independent consultants to focus on ensuring that our product
                                            candidate satisfies the existing coverage and reimbursement criteria of such third-party
                                            payors.

 


11
 

 


 
●
Transfer our manufacturing equipment and process to Phillips-Medisize
prior to product launch; and

 


 
●
Hire
    and retain appropriate sales and marketing personnel to develop, implement and launch a promotional campaign for our insulin pump
    substantially focused on our target market.

 
As
with any medical device attempting to enter and successfully compete with existing products in an established and competitive marketplace,
we will face significant hurdles to accomplish the above steps to commercialization including:
 


 
●
Obtaining
    FDA 510(k) clearance to market and sell our insulin pump to the public;

 


 
●
Obtaining
    any other FDA-required authorizations with regard to our product, as required by the Federal Food, Drug, and Cosmetic
    Act, or  FDCA, which is administered by the FDA;

 


 
●
Educating endocrinologists, physician’s assistants, nurse practitioners
and nurse educators, who typically prescribe pump usage, and certified diabetes educators and dieticians, who provide education and guidance
to diabetes patients, as to what we believe to be the superior qualities of our product candidate. We will continue to exhibit at the
Association of Diabetes Care & Education Specialists, or ADCES, conference annually;

 


 
●
Demonstrating
    to select general practitioners, who have historically been skeptical of the heightened support inherent in insulin pumps, our product
    candidate’s ease of use and convenience;

 


 
●
Ensuring
    that our final product does, in fact, meet the needs of Almost Pumpers;

 


 
●
Overcoming
    the historic obstacles and reluctance of Almost Pumpers to using insulin pumps to treat their diabetes; and

 


 
●
Ensuring
    that third-party payors agree to cover all or a substantial portion of the purchase price and recurring costs of the use of our insulin
    pump.

 
Looking
Forward
 
Going
forward, we expect to continue to evolve the MODD1 pumps and their capabilities and functionality both in response to patient needs and
as part of our current platform roadmap.
 


 
●
With our future MODD1+
    product, we intend to seek to add phone-based control and Alternative Controller Enabled (“ACE”) and Automated Insulin
    Deliver (“AID”) capability to allow integration with popular continuous glucose monitors. We believe this will expand
    our available market to include many existing pumpers. The new model has the same modular design and low-cost components as MODD1
    and provides a much desired breakthrough for patients - two-factor command authentication that allows the wearer to use an application
    on his/her cell phone as the controller.

 


 
●
AID control functionality
    is being developed and will be added via an ACE designation on the pump.

 


 
●
Any approved AID controller
    can drive insulin delivery in “auto” mode, when appropriate.

 


 
●
CGM integration allows
    the controller to potentially adjust basal insulin rate for meals and exercise with an approved algorithm.

 


 
●
With our future MODD2 product,
    we will seek to move to a full-featured, multi-chamber pump optimized for high time-in-range fully autonomous close loop insulin
    delivery utilizing the form factor and cost advantages of its pumping designs to create an affordable, easy to use drug delivery
    system to realize the aspiration of true “artificial pancreas” systems. We envision moving to a drug prefill model, such
    that cartridges can be filled with insulin or other drugs and shipped cold chain to patients, further simplifying the use process.

 


12
 

 
Competition
 
Today,
in the United States, only three companies are commercializing insulin pumps to T1D patients and insulin treated T2D patients and have
significant market share:
 


 
●
Medtronic - commercializes
    the durable Minimed 770G and also offers older durable pumps (670G, 630G etc.). In 2020, they held approximately 51% of the US insulin
    pump market.

 


 
●
Tandem - commercializes
    the durable t:slim X2 pump (with or without algorithms - Basal-IQ and Control-IQ). In 2020, they held approximately 28% of the US
    insulin pump market.

 


 
●
Insulet - commercializes
    the disposable Omnipod patch pump with approximately 19% of the US market in 2020.

 





Medtronic pump and infusion
    set
Tandem pump and infusion
    set

 
These
three insulin pump offerings are vying for the attention of the most motivated and well insured in hope of converting them away from
their reliance on MDI. The t:slim X2 and Minimed 770G each have a ~$5,000 list price that is covered through Durable Medical Equipment
(DME) reimbursement and daily consumables, which comprise cartridge, tubing and set for each three-day period, as well. These products
have controllers integrated into the pump, making them cumbersome and bulky, along with long (> 20 inch) tubing between the pump and
the cannular site. The Omnipod is the third offering, a patch pump that attaches to your body for 72 hours and uses a separate controller
to manage the insulin delivery process. Insurance coverage for Omnipod can be provided via DME but also via Pharmacy Benefit (PB). The
Omnipod patch pump is more expensive per day and less accurate than other insulin pumps, according to a Mende 2022 study. Around 33%
of people living with T1D are currently using insulin pumps; of these, the vast majority are using one of these three offerings, a statistic
that has not changed significantly over the last 5+ years.
 

 
All
of these pump products require extensive training to initiate and two to four hours per day to use and manage on an ongoing basis. We
believe this level of sophistication and effort combined with the cost and awkwardness of these products contribute to the limited uptake.
 
Although
there are purely mechanical pumps available to patients with a small percentage of T2D patients using the Mannkind V-Go patch pump, a
fixed basal rate and a button to deliver small boluses. This pump is simple to use, though gives little performance decision to the user
(e.g., no possibility to change the basal rate, no possibility to stop bolus doses, small reservoir, pump that needs to be changed every
day, etc.). The last available patch pump is provided by Cequr, called Simplicity, a bolus only delivery option without basal delivery.
Beta Bionics, Inc. and Deka Research and Development Corp. have received clearance for their tube-based pumps in the last 12 months,
but it is too early to assess their commercial traction.
 

13
 

 
Medtronic
has launched a new version of its insulin pump, the Minimed 780G, already available in some European countries with an advanced algorithm,
but no obvious change in hardware. Tandem is now selling a small, no display pump called Mobi. The Mobi has a small 2mL reservoir and
is controlled by a separate unit, similar to the current Omnipod product. Insulet has also launched the Omnipod 5, a similar patch pump
to its current offering, that includes an AID algorithm.
 
Approximately
79% of the people who rely upon MDI therapy choose to not administer a shot outside of their house, which creates a poorly controlled
group. MODD1 is designed to focus upon a segment of these people and mobilize them via a simple, easy to use, affordable product.
 
 
 
Intellectual
Property
 
Our
success depends in part on our ability to obtain patents and trademarks, maintain trade secret and know-how protection, enforce our proprietary
rights against infringers, and operate without infringing on the proprietary rights of third parties. Because of the length of time and
expense associated with developing new products and bringing them through the regulatory approval process, the health care industry places
considerable emphasis on obtaining patent protection and maintaining trade secret protection for new technologies, products, processes,
know-how, and methods.
 
As
of March 31, 2024, we held four U.S. utility and no foreign patents, and we also held 22 pending applications in the United States and
abroad. The patents and patent applications cover various aspects of our technology, including our proprietary fluid movement technology
and associated features of our insulin delivery methodology. There can be no assurance that the pending patent applications will result
in the issuance of patents, that patents issued to or licensed by us will not be challenged or circumvented by competitors, or that these
patents will be found to be valid or sufficiently broad to protect our technology or provide us with a competitive advantage.
 
Government
Regulation
 
Our
operations are subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which we or our research
and development partners do business. The laws and regulations governing our business and interpretations of those laws and regulations
and are subject to frequent change. Our ability to operate profitably will depend in part upon our ability, and that of our research
and development partners and affiliates, to operate in compliance with applicable laws and regulations. The laws and regulations relating
to medical products and healthcare services that apply to our business and that of our partners and affiliates continue to evolve, and
we must, therefore, devote significant resources to monitoring developments in legislation, enforcement, and regulation in such areas.
As the applicable laws and regulations change, we are likely to make conforming modifications in our business processes from time to
time. We cannot provide assurance that a review of our business by courts or regulatory authorities will not result in determinations
that could adversely affect our operations or that the regulatory environment will not change in a way that restricts our operations.
 

14
 

 
FDA
Regulation
 
In
the United States, medical devices are strictly regulated by the FDA. Under the FDCA, a medical device is defined as “an instrument,
apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component, part
or accessory which is, among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation,
treatment, or prevention of disease, in man or other animals; or intended to affect the structure or any function of the body of man
or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other
animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.” This definition
provides a clear distinction between a medical device and other FDA regulated products such as drugs. If the primary intended use of
a medical product is achieved through chemical action or by being metabolized by the body, the product is usually a drug or biologic.
If not, it is generally a medical device.
 
We
have developed an insulin pump delivery system, which is regulated by the FDA as a medical device under the FDCA, as implemented and
enforced by the FDA. The FDA regulates the development, testing, manufacturing, labeling, packaging, storage, installation, servicing,
advertising, promotion, marketing, distribution, import, export, and market surveillance of medical devices.
 
Device
Premarket Regulatory Requirements
 
Before
being introduced into the U.S. market, each medical device must obtain marketing clearance or approval from the FDA through the premarket
notification (or 510(k)) process, the de novo classification process, or the premarket approval, or PMA, process, unless they
are determined to be Class I devices or to otherwise qualify for an exemption from one of these available forms of premarket review and
authorization by the FDA. Under the FDCA, medical devices are classified into one of three classes - Class I, Class II or Class III -
depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance
of safety and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among
other things, the necessity and type of FDA review required prior to marketing the device. Class I devices are those for which reasonable
assurance of safety and effectiveness can be maintained through adherence to general controls which include compliance with the applicable
portions of the FDA’s Quality System Regulation (the “QSR”), as well as regulations requiring facility registration
and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional
materials. The Class I designation also applies to devices for which there is insufficient information to determine that general controls
are sufficient to provide reasonable assurance of the safety and effectiveness of the device or to establish special controls to provide
such assurance, but that are not life-supporting or life-sustaining or for a use which is of substantial importance in preventing impairment
of human health, and that do not present a potential, unreasonable risk of illness or injury.
 
Class
II devices are those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and
there is sufficient information to establish “special controls.” These special controls can include performance standards,
post-market surveillance requirements, patient registries and FDA guidance documents describing device-specific special controls. While
most Class I devices are exempt from the premarket notification requirement, most Class II devices require a premarket notification prior
to commercialization in the United States; however, the FDA has the authority to exempt Class II devices from the premarket notification
requirement under certain circumstances. As a result, manufacturers of most Class II devices must submit premarket notifications to the
FDA under Section 510(k) of the FDCA (21 U.S.C. § 360(k)) in order to obtain the necessary clearance to market or commercially distribute
such devices. To obtain 510(k) clearance, manufacturers must submit to the FDA adequate information demonstrating that the proposed device
is “substantially equivalent” to a “predicate device” that is already on the market. A predicate device is a
legally marketed device that is not subject to PMA, meaning, (i) a device that was legally marketed prior to May 28, 1976 (“pre-amendments
device”) and for which a PMA is not required, (ii) a device that has been reclassified from Class III to Class II or I or (iii)
a device that was found substantially equivalent through the 510(k) process. If the FDA agrees that the device is substantially equivalent
to the predicate device identified by the applicant in a premarket notification submission, the agency will grant 510(k) clearance for
the new device, permitting the applicant to commercialize the device. Premarket notifications are subject to user fees, unless a specific
exemption applies.
 
If
there is no adequate predicate to which a manufacturer can compare its proposed device, the proposed device is automatically classified
as a Class III device. In such cases, a device manufacturer must then fulfill the more rigorous PMA requirements or can request a risk-based
classification determination for its device in accordance with the de novo classification process.
 

15
 

 
Devices
that are intended to be life sustaining or life supporting, devices that are implantable, devices that present a potential unreasonable
risk of harm or are of substantial importance in preventing impairment of health, and devices that are not substantially equivalent to
a predicate device and for which safety and effectiveness cannot be assured solely by the general controls and special controls are placed
in Class III. Such devices generally require FDA approval through the PMA process, unless the device is a pre-amendments device not yet
subject to a regulation requiring premarket approval. The PMA process is more demanding than the 510(k) process. For a PMA, the manufacturer
must demonstrate through extensive data, including data from preclinical studies and one or more clinical trials, that the device is
safe and effective for its proposed indication. The PMA must also contain a full description of the device and its components, a full
description of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA submission,
the FDA determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application
for review, it has 180 days under the FDCA to complete its review and determine whether the proposed device can be approved for commercialization,
although in practice, PMA reviews often take significantly longer, and it can take up to several years for the FDA to issue a final decision.
Before approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities for the product to ensure compliance
with the QSR.
 
The de
novo classification process allows a manufacturer whose novel device is automatically classified into Class III to request down-classification
of its device to Class I or Class II, on the basis that the device presents low or moderate risk, as an alternative to following the
typical Class III device pathway requiring the submission and approval of a PMA application. With our submission in January 2024, the
FDA has confirmed our MODD 1 qualifies as a 510(k) eligible device and does not require a de novo classification.
 
Clinical
trials are almost always required to support PMAs and are sometimes required to support 510(k) and de novo classification
submissions. In our case, usability studies of our intended users are required and have been completed. All clinical investigations of
devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption,
or IDE, regulations that govern investigational device labeling, prohibit promotion of investigational devices, and specify recordkeeping,
reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk,”
as defined by the FDA, the agency requires the study sponsor to submit an IDE application to the FDA, which must become effective prior
to commencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies
the application or notifies the sponsor that the investigation is on hold and may not begin until the sponsor provides supplemental information
about the investigation that satisfies the agency’s concerns. If the FDA determines that there are deficiencies or other concerns
with an IDE that require modification of the study, the FDA may permit a clinical trial to proceed under a conditional approval. The
FDA may also notify the sponsor that the study is approved as proposed or approved with specific requested modification. Furthermore,
the agency may withdraw approval of an IDE under certain circumstances. In addition, the study must be approved by, and conducted under
the oversight of, an institutional review board, or IRB, for each clinical site. If the device presents a non-significant risk to the
patient according to criteria established by the FDA as part of the IDE regulations, a sponsor may begin the clinical trial after obtaining
approval for the trial by one or more IRBs without separate authorization from the FDA, but must still comply with abbreviated IDE requirements,
such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.
 
Post-Marketing
Restrictions and Enforcement
 
After
a device is placed on the market, numerous regulatory requirements apply. These include, but are not limited to:
 


 
●
submitting and updating
    establishment registration and device listings with the FDA;

 


 
●
compliance with the QSR,
    which requires manufacturers to follow stringent design, testing, control, documentation, record maintenance, including maintenance
    of complaint and related investigation files, and other quality assurance controls during the manufacturing process;

 


 
●
unannounced routine or
    for-cause device facility inspections by the FDA, which may include our suppliers’ facilities; and

 


 
●
labeling regulations, which
    prohibit the promotion of products for uncleared or unapproved (or “off-label”) uses and impose other restrictions relating
    to promotional activities;

 


 
●
corrections and removal
    reporting regulations, which require that manufacturers report to the FDA field corrections or removals if undertaken to reduce a
    risk to health posed by a device or to remedy a violation of the FDCA that may present a risk to health; and

 


 
●
post-market surveillance
    regulations, which apply to certain Class II or III devices when necessary to protect the public health or to provide additional
    safety and effectiveness data for the device.

 


16
 

 
In
addition, under the FDA medical device reporting, or MDR, regulations, medical device manufacturers are required to report to the FDA
information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would
likely cause or contribute to death or serious injury if the malfunction of the device or a similar device of such manufacturer were
to recur. The decision to file an MDR involves a judgment by the manufacturer. If the FDA disagrees with the manufacturer’s determination,
the FDA can take enforcement action.
 
The
MDR requirements also extend to health care facilities that use medical devices in providing care to patients, or “device user
facilities,” which include hospitals, ambulatory surgical facilities, nursing homes, outpatient diagnostic facilities, or outpatient
treatment facilities, but not physician offices. A device user facility must report any device-related death to both the FDA and the
device manufacturer, or any device-related serious injury to the manufacturer (or, if the manufacturer is unknown, to the FDA) within
10 days of the event. Device user facilities are not required to report device malfunctions that would likely cause or contribute to
death or serious injury if the malfunction were to recur but may voluntarily report such malfunctions through MedWatch, the FDA’s
Safety Information and Adverse Event Reporting Program.
 
The
FDA also has the authority to require the recall of commercialized medical device products in the event of material deficiencies or defects
in design or manufacture. The authority to require a recall must be based on an FDA finding that there is a reasonable probability that
the device would cause serious adverse health consequences or death. Manufacturers may, under their own initiative, recall a product
if any distributed devices fail to meet established specifications, are otherwise misbranded or adulterated under the FDCA, or if any
other material deficiency is found. The FDA requires that certain classifications of recalls be reported to the FDA within ten working
days after the recall is initiated.
 
The
failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following
sanctions:
 


 
●
warning letters, fines,
    injunctions or civil penalties;

 


 
●
recalls, detentions or
    seizures of products;

 


 
●
operating restrictions;

 


 
●
delays in the introduction
    of products into the market;

 


 
●
total or partial suspension
    of production;

 


 
●
delay or refusal of the
    FDA or other regulators to grant 510(k) clearance, PMA approvals, or other marketing authorization to new products;

 


 
●
withdrawals of marketing
    authorizations; or

 


 
●
in the most serious cases,
    criminal prosecution.

 
To
ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled
and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of subcontractors.
 
Federal
Trade Commission Regulatory Oversight
 
Our
advertising for our products and services will be subject to federal truth-in-advertising laws enforced by the Federal Trade Commission
(the “FTC”) as well as comparable state consumer protection laws. Under the Federal Trade Commission Act (the “FTC
Act”), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices
in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; and (c) gather and compile information
and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce. The FTC
has very broad enforcement authority, and failure to abide by the substantive requirements of the FTC Act and other consumer protection
laws can result in administrative or judicial penalties, including civil penalties, injunctions affecting the manner in which we would
be able to market services or products in the future, or criminal prosecution.
 
Healthcare
Law and Regulation
 
United
States
 
If
our MODD1 product or our other future product candidates are approved in the United States, we will have to comply with various U.S.
federal and state laws, rules and regulations pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral
laws, rules and regulations. Violations of the fraud and abuse laws are punishable by criminal and civil sanctions, including, in some
instances, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid. These laws include
the following:
 


 
●
the federal Anti-Kickback
    Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration,
    directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order
    or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program
    such as Medicare and Medicaid;

 


17
 

 


 
●
the federal False Claims
    Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly
    presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false
    statement to avoid, decrease or conceal an obligation to pay money to the federal government;

 


 
●
the federal Health Insurance
    Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any
    healthcare benefit program or making false statements relating to healthcare matters;

 


 
●
HIPAA, as amended by the
    Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including
    mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health
    information;

 


 
●
the federal false statements
    statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement
    in connection with the delivery of or payment for healthcare benefits, items or services;

 


 
●
the federal transparency
    requirements under the Physician Payments Sunshine Act require manufacturers of FDA-approved drugs, devices, biologics and medical
    supplies covered by Medicare or Medicaid to report, on an annual basis, to the Department of Health and Human Services information
    related to payments and other transfers of value to physicians, teaching hospitals, and certain advanced non-physician health care
    practitioners and physician ownership and investment interests; and

 


 
●
analogous state and foreign
    laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims
    involving healthcare items or services reimbursed by nongovernmental third-party payors, including private insurers.

 
Some
state laws require pharmaceutical or medical device companies to comply with the relevant industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government in addition to requiring drug and device manufacturers to
report information related to payments to physicians and other health care providers or marketing expenditures.
 
State
and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other
in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. We also may be subject to, or may in
the future become subject to, U.S. federal and state, and foreign laws and regulations imposing obligations on how we collect, use, disclose,
store and process personal information. Our actual or perceived failure to comply with such obligations could result in liability or
reputational harm and could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand
our customer base and thereby decrease our future revenues.
 
The
European Union approves the use of medical devices in a very different way. They have similar regulations and requirements to adhere
to, however, a Notified Body, in the form of a private company, will represent their interests and is required to have sufficient expertise
to review all applications and the company’s internal processes to ensure the safety of the product for which approval is being
requested. We are in the process of identifying a Notified Body to represent us, and we will follow our FDA submission process with regard
to preparing the materials and processes required to meet the regulations and gain clearance.
 
European
Union
 
EEA
 
In
the European Economic Area, (which is comprised of the 27 member states of the European Union plus Norway, Iceland and Liechtenstein),
or EEA, manufacturers of medical devices need to comply with the Essential Requirements laid out in Annex I to the EU Medical Devices
Directive (Council Directive 93/42/EEC) or with the General Safety and Performance Requirements (GSPR) of the new EU Medical Devices
Regulation (EU 2017/745). Compliance with these requirements is a prerequisite to be able to affix the CE mark to medical devices, without
which they cannot be marketed or sold in the EEA. To demonstrate compliance with the Essential Requirements and the GSPR and obtain the
right to affix the CE Mark, manufacturers of medical devices must undergo a conformity assessment procedure, which varies according to
the type of medical device and its classification. Except for low-risk medical devices (Class I with no measuring function and which
are not sterile), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its
products with the Essential Requirements and the GSPR, a conformity assessment procedure requires the intervention of a Notified Body,
which is an organization designated by a competent authority of an EEA country to conduct conformity assessments. Depending on the relevant
conformity assessment procedure, the Notified Body would audit and examine the Technical File and the quality system for the manufacture,
design and final inspection of the devices. The Notified Body issues a CE Certificate of Conformity following successful completion of
a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the Essential
Requirements and GSPR. This Certificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and
signed a related EC Declaration of Conformity. As a general rule, demonstration of conformity of medical devices and their manufacturers
with the Essential Requirements and GSPR must be based, among other things, on the evaluation of clinical data supporting the safety
and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves
its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized
and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety
of the device are supported by suitable evidence.
 


18
 

 
All
manufacturers placing medical devices into the market in the EEA must comply with the EU Medical Device Vigilance System. Under this
system, incidents must be reported to the relevant authorities of the member states of the EEA, and manufacturers are required to take
Field Safety Corrective Actions, or FSCAs, to reduce a risk of death or serious deterioration in the state of health associated with
the use of a medical device that is already placed on the market. An incident is defined as any malfunction or deterioration in the characteristics
and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly,
might lead to or might have led to the death of a patient or user or of other persons or to a serious deterioration in their state of
health. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated
by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.
Where appropriate, our products commercialized in Europe are CE marked and classified as either Class I or Class II.
 
In
2017, the European Parliament passed the Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive. Unlike
directives, which must be implemented into the national laws of the EEA member states, the regulations would be directly applicable (i.e.,
without the need for adoption of EEA member State laws implementing them) in all EEA member states and are intended to eliminate current
differences in the regulation of medical devices among EEA member States. The Medical Devices Regulation, among other things, is intended
to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and in vitro
diagnostic devices and ensure a high level of safety and health while supporting innovation.
 
The
Medical Device Regulation became applicable on May 26, 2021. Devices lawfully placed on the market pursuant to the EU Medical Devices
Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2026. The
Medical Devices Regulation, among other things:
 


 
●
strengthens the rules on
    placing devices on the market and reinforces surveillance once they are available;

 


 
●
establishes explicit provisions
    on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

 


 
●
improves the traceability
    of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

 


 
●
sets up a central database
    to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and

 


 
●
strengthens rules for the
    assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are
    placed on the market.

 

19
 

 
Available
Information
 
Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished
pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as section 16 reports on Form 3, 4, or 5, are available
free of charge on our website at www.modular-medical.com. as soon as it is reasonably practicable after they are filed or furnished with
the SEC. Our Code of Business Conduct and Ethics and the charters for the Audit Committee, Compensation Committee and Nominating and
Governance Committee are also available on our website. The Code of Business Conduct and charters are also available in print to any
stockholder upon request without charge. Requests for such documents should be directed to Modular Medical, Inc., 10740 Thornmint Road,
San Diego CA 92127, Attn. CFO. Our Internet website and the information contained on it or connected to it are not part of, or incorporated
by, reference into this Report. Our filings with the SEC are also available on the SEC’s website at http://www.sec.gov.
 
Corporate
Information
 
We
are a Nevada corporation, and Quasuras, Inc., a Delaware corporation, is our only subsidiary. Our corporate headquarters and operating
facilities are located at 10740 Thornmint Road, San Diego, CA 92127. Our telephone number is (858) 800-3500. We maintain a website at
www.modular-medical.com.
 
Employees
 
As
of March 31, 2024, we had 40 employees all of whom are located in the United States and 39 of whom are full-time, consisting of 36 in
research and development and manufacturing operations and 4 in general and administrative functions.
 
ITEM
1A. RISK FACTORS
 
This
Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of our objectives,
expectations and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applicable to all forward-looking
statements wherever they appear in this report. Our actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Annual Report
on Form 10-K.
 
We
might not be able to continue as a going concern.
 

Our consolidated financial statements as of
March 31, 2024 have been prepared under the assumption that we will continue as a going concern twelve months from the date of
issuance of this Report. At March 31, 2024, we had cash and cash equivalents of $9.2 million and an accumulated deficit of $65.9
million. In February 2024, we completed a public offering of common stock for net proceeds to us of approximately $10.3 million. In
May 2023, we completed a public offering of common stock and warrants for net proceeds to us of approximately $9.7 million. Even
with these offering proceeds, we do not believe that our cash and cash equivalents would be sufficient to fund our operations for
the period of 12 months from the date of issuance of this report, and we would need to raise additional capital. As a result of
our expected operating losses and cash burn for the foreseeable future and recurring losses from operations, if we are unable to
raise sufficient capital through additional debt or equity arrangements, there will be uncertainty regarding our ability to maintain
liquidity sufficient to operate our business effectively, which raises substantial doubt as to our ability to continue as a going
concern. If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in us.


 
If
we are unable to generate sustainable operating profit and sufficient cash flows, then our future success will depend on our ability
to raise capital. We intend to seek additional financing and evaluate financing alternatives in order to meet our cash requirements for
the foreseeable future. We cannot be certain that raising additional capital, whether through selling additional debt or equity securities
or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us. If we issue
additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock,
and our current stockholders may experience dilution. If we are unable to obtain funds when needed or on acceptable terms, we may be
required to curtail our current product development programs, cut operating costs, forego future development and other opportunities
or even terminate our operations.
 
We
are a developmental stage medical device company and have a history of significant operating losses; we expect to continue to incur operating
losses, and we may never achieve or maintain profitability.
 
As
a development-stage enterprise, we do not currently have revenues to generate cash flows to cover operating expenses. Since our inception,
we have incurred operating losses in each year due to costs incurred in connection with research and development activities and general
and administrative expenses associated with our operations. For the years ended March 31, 2024 and, 2023, we incurred net losses of approximately
$17.5 million and $13.9 million, respectively. As a result, we need to raise additional capital in the future, which may or may not be
available to us at all or only on unfavorable terms.
 


20
 

 
We
expect to incur losses for the foreseeable future as we continue the development of, and seek regulatory clearance and approvals for,
our insulin pump. As our MODD1 insulin pump is currently our only product, if it fails to gain regulatory approval and market acceptance,
we will not be able to generate any revenue, or explore other opportunities to enhance stockholder value, such as through a sale. If
we fail to generate revenue and eventually become profitable, or if we are unable to fund our continuing losses, our stockholders could
lose all or a substantial part of their investment.
 
We
will need substantial additional funding to complete subsequent phases of the development of our insulin pump product candidate and to
operate our business and such funding may not be available or, if it is available, such financing is likely to substantially dilute our
existing stockholders.
 
The discovery, development, and commercialization
of new medical devices, such as our insulin pump, entails significant costs. We have completed the engineering and mechanical development
of our insulin pump and cartridge, and submitted the product to the FDA for clearance. In addition, we have also implemented a production-level
manufacturing process, including purchasing required equipment for low-level manufacturing. We will continue to refine our insulin pump
to, among other things, meet the general needs and preferences of the Almost Pumper marketplace and the guidelines of third-party payors.
To enable us to accomplish these and other related items and continue to operate our business, we will need to raise substantial additional
capital and/or enter into strategic partnerships or joint ventures to enable us to:
 


 
●
seek European regulatory approvals with appropriate clinical studies;

 


 
●
expand and continue to improve our manufacturing and commercialization capabilities;

 


 
●
develop, test, and, if
    approved, market our product candidate;

 


 
●
acquire or license additional
    internal systems and other infrastructure; and

 


 
●
hire and support additional management, administrative, sales and marketing,
and technical personnel.

 
Until
we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never achieve, we expect to finance
our cash needs primarily through public or private equity offerings, debt financings or through the establishment of possible strategic
alliances. We may in the future seek additional capital from public or private offerings of our capital stock or borrow additional amounts
under new credit lines or from other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders
may experience dilution, we may incur significant financing costs, and the new equity or debt securities may have rights, preferences
and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing,
joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable
rights to the MODD1 pump or our potential future products or proprietary technologies or grant licenses on terms that are not favorable
to us.
 
We cannot be certain that additional funding will
be available on acceptable terms, or at all. If we are not able to secure additional equity funding when needed, we may have to delay,
reduce the scope of, or eliminate one or more of our post-market clinical studies, development programs or future commercialization initiatives.
In addition, any additional equity funding that we do obtain will dilute the ownership held by our existing equity holders. The amount
of this dilution may be substantially increased if the trading price of our common stock is lower at the time of any financing. Regardless,
the economic dilution to stockholders will be significant if our stock price does not increase significantly, or if the effective price
of any sale is below the price paid by a particular stockholder. Any debt financing that we obtain in the future could involve substantial
restrictions on activities and creditors could seek a pledge of some or all of our assets. We have not identified potential sources for
such financing that we will require, and we do not have commitments from any third parties to provide any future debt financing. If we
fail to obtain funding as needed, we may be forced to cease or scale back operations, and our business, prospects, results of operations,
financial condition and stock price would be adversely affected.

 
We
have a limited operating history and historical financial information upon which you may evaluate our performance.
 
You
should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that,
like us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully complete
our studies and/or implement our existing and new products. If we fail to do so, it could materially harm our business and impair the
value of our common stock. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business, conducting
research, and developing new products. These include, but are not limited to, inadequate funding, failure to obtain regulatory approval,
unforeseen research issues, lack of consumer, physician or third-party payor acceptance, competition, sluggish product development, and
inadequate sales and marketing. The failure by us to meet any of these conditions would have a materially adverse effect upon us and
may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.
 
The
amount of financing we require will depend on a number of factors, many of which are beyond our control. Our results of operations, financial
condition and stock price are likely to be adversely affected if our funding requirements increase or are otherwise greater than we expect.
 
Our
future funding requirements will depend on many factors, including, but not limited to:
 


 
●
the testing costs for our
    insulin pump product candidate and other development activities conducted by us directly, and our ability to successfully conclude
    the studies and activities and achieve favorable results;

 


21
 

 


 
●
our ability to attract
    future strategic partners to pay for or share costs related to our product development efforts;

 


 
●
the costs and timing of
    seeking and obtaining regulatory clearance and approvals for our product candidate;

 


 
●
the costs of filing, prosecuting,
    maintaining and enforcing any patents and other intellectual property rights that we may have and defending against potential claims
    of infringement;

 


 
●
decisions to hire additional
    scientific, engineering or administrative personnel or consultants;

 


 
●
our ability to manage administrative
    and other costs of our operations; and

 


 
●
the presence or absence
    of adverse developments in our research program.

 
If
any of these factors cause our funding needs to be greater than expected, our operations, financial condition, ability to continue operations
and stock price may be adversely affected.
 
Our
future cash requirements may differ significantly from our current estimates.
 
Our
cash requirements may differ significantly from our estimates from time to time, depending on a number of factors, including:
 


 
●
the costs and results of
    our clinical studies regarding our insulin pump product candidate;

 


 
●
the time and costs involved
    in obtaining regulatory clearance and approvals;

 


 
●
whether we are able to
    obtain funding under future licensing agreements, strategic partnerships, or other collaborative relationships, if any;

 


 
●
the costs of compliance
    with laws, regulations, or judicial decisions applicable to us; and

 


 
●
the
    costs of general and administrative infrastructure required to manage our business and protect corporate assets and stockholder interests.

 
If
we fail to raise additional funds on a timely basis, we will need to scale back our business plans, which would adversely affect our
business, prospects, results of operations, financial condition, and stock price, and we may even be forced to discontinue our operations
and liquidate our assets.
 

22
 

 
Technological
breakthroughs in diabetes monitoring, treatment or prevention could render our insulin pump obsolete.
 
The
diabetes treatment market is subject to rapid technological change and product innovation. Our insulin pump is based on our proprietary
technology, but a number of companies, medical researchers and existing pharmaceutical companies are pursuing new delivery devices, delivery
technologies, sensing technologies, procedures, drugs and other therapeutics for the monitoring, treatment and/or prevention of insulin-dependent
diabetes. Any technological breakthroughs in diabetes monitoring, treatment or prevention could render our insulin pump obsolete, which,
since our insulin pump is our only product candidate, would have a material adverse effect on our business, our insulin pump is our only
product candidate, would have a material adverse effect on our business, prospects, results of operations and financial condition and
could result in stockholders losing their entire investment.
 
Any
failure to attract and retain skilled directors, executives, employees and consultants could impair our product development and commercialization
activities.
 
Our
business depends on the skills, performance, and dedication of our directors, executive officers and key engineering, scientific and
technical advisors. Many of our current engineering or scientific advisors are independent contractors and are either self-employed or
employed by other organizations. As a result, they may have conflicts of interest or other commitments, such as consulting or advisory
contracts with other organizations, which may affect their ability to provide services to us in a timely manner. We will need to recruit
additional directors, executive management employees, and advisers, particularly engineering, scientific and technical personnel, which
will require additional financial resources. In addition, there is currently intense competition for skilled directors, executives and
employees with relevant engineering, scientific and technical expertise, and this competition is likely to continue. If we are unable
to attract and retain persons with sufficient engineering, scientific, technical and managerial experience, we may be forced to limit
or delay our product development activities or may experience difficulties in successfully conducting our business, which would adversely
affect our business, prospects, results of operations and financial condition.
 
Our
operations are substantially dependent upon key personnel.
 
Our
performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel.
The loss of services of any of our executive officers or other key employees could have a material adverse effect on our business, financial
condition and results of operations. In addition, any future expansion of our business will depend on our ability to identify, attract,
hire, train, retain and motivate other highly skilled managerial, marketing, customer service and manufacturing personnel, and our inability
to do so could have a material adverse effect on our business, financial condition and results of operations.
 
We
are dependent on the performance and continued engagement of our Chairman, President and Principal Financial Officer.
 
We
are dependent on the performance and continued engagement of Paul DiPerna, our chairman, president and principal financial officer. Although
we believe we will be able to engage qualified personnel for such purposes, an inability to do so could materially adversely affect our
ability to market, sell, and enhance our products. While Mr. DiPerna is currently devoting his full-time working efforts to us, other
employees and consultants may only be available to us on a part-time basis. The loss of one or more of our key employees, especially
Mr. DiPerna, or our inability to hire and retain other qualified employees, including but not limited to research and development, sales,
manufacturing, and administrative support staff, could have a material adverse effect on our business, prospects, results of operations
and financial condition.
 
We
have limited internal research and development personnel, making us dependent on consulting relationships.
 
We
consider research and development to be an important part of the process of designing, developing, obtaining regulatory required approvals
and the eventual commercialization of our insulin pump. We continue to incur increased research and development expenditures, which are
primarily attributable to effort and expenses incurred in designing and developing our innovative insulin pump. We expect to continue
to incur substantial costs related to research and development.
 
We
will need to outsource and rely on third parties for various aspects relating to the development, manufacture, sales and marketing of
our insulin pump as well as in connection with assisting us in the preparation and filing of our FDA submission, and our future success
will be dependent on the timeliness and effectiveness of the efforts of these third parties.
 
We
are dependent on consultants for important aspects of our product development strategy. We do not have the required financial resources
and personnel to carry out independently the development of our product candidate, and do not have the capability or resources to manufacture,
market or sell our current product candidate. As a result, we contract with and rely on third parties for important functions, including
in connection with the development and finalization of our insulin pump, the preparation and filing of our FDA submission and eventual
manufacturing and commercialization of our product candidate. We have recently entered into several agreements with third parties for
such services. If problems develop in our relationships with third parties, or if such parties fail to perform as expected, it could
lead to delays or lack of progress in obtaining FDA clearance, significant cost increases, changes in our strategies, and even failure
of our product initiatives.
 


23
 

 
We
may not be able to identify, negotiate and maintain the strategic alliances necessary to develop and commercialize our products and technologies,
and we will be dependent on our corporate partners if we do.
 
We
may seek to enter into a strategic alliance with a diabetes-related service providing company for the further development and approval
of our insulin pump product candidate. At this time, we have not entered into any such strategic alliance. Strategic alliances, if entered
into, could potentially provide us with additional funds, expertise, access, and other resources in exchange for exclusive or non-exclusive
licenses or other rights to the product that we are currently developing or a product we may explore in the future. We cannot give any
assurance that we will be able to enter into strategic relationships with a diabetes-related service providing company or others in the
near future or at all. In addition, we cannot assure you that any agreements that we do reach will allow us to achieve our goals or that
such grants will be on terms that prove to be economically beneficial to us. When we do enter into strategic or contractual relationships,
we become dependent on the successful performance of our partners or counter-parties. If they fail to perform as expected, such failure
could adversely affect our financial condition, lead to increases in our capital needs, or hinder or delay our development efforts. See
“Our Business -Employees” below.
 
We
may not receive the necessary regulatory clearance or approvals for our insulin pump, and failure to timely obtain necessary clearances
and/or approvals could harm our then operations, including our ability to commercialize our product candidate.
 
Before
we can market a new medical device, such as our insulin pump, we must first receive clearance under Section 510(k) of the Federal Food,
Drug, and Cosmetic Act, or the “FDCA.” In the 510(k) clearance process, before a device may be marketed, the FDA must determine
that such proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes
a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments
device), a device that was originally on the U.S. market pursuant to a premarket approval (PMA) and later down-classified, or a 510(k)-exempt
device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and
either have the same technological characteristics as the predicate device or have different technological characteristics and not raise
different questions of safety or effectiveness than the predicate device. In January 2024, we submitted a 510(k) premarket notification
to the United States Food and Drug Administration (“FDA”) for our MODD1 insulin pump.
 
Certain
future modifications made to our product candidate, which we currently expect to be cleared through 510(k), may require a new 510(k)
clearance. The 510(k) clearance process can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes
less than 12 months, but it can last longer. Despite the time, effort and cost, a device may not be approved or cleared by the FDA. Any
delay or failure to obtain necessary regulatory authorizations could harm our business, including our ability to commercialize our product
candidate and our stockholders could lose their entire investment. Furthermore, even if we are granted the required regulatory authorizations,
such authorizations may be subject to significant limitations on the indicated uses for the device, which may limit the market for our
product candidate.
 
If
the FDA requires us to go through a lengthier, more rigorous examination for our product candidate than we had expected, product introductions
or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.
 
The
FDA can delay, limit or deny clearance or approval for our insulin pump medical device for many reasons, including, for example:
 

●our
                                            inability to demonstrate to the satisfaction of the FDA that our product candidate is substantially
                                            equivalent to the proposed predicate device;

 

●the
                                            disagreement of the FDA with the design or implementation of our performance testing protocols
                                            or the interpretation of data from our performance testing;

 

●the
                                            data from performance testing may be insufficient to support a determination of substantial
                                            equivalence or that our device meets required special controls or applicable performance
                                            standards;

 

●our
                                            inability to demonstrate that the benefits of our pump outweigh the risks;

 

●the
                                            manufacturing process or facilities we intend to use may not meet applicable requirements;
                                            for example, we experienced issues maintaining insulin stability on an initial version of
                                            our pump product candidate, and we attributed this issue to the materials used in the production
                                            of our product; we believe we have made the necessary changes to our materials and process
                                            to address this issue and will be completing the required testing prior to our FDA submission;
                                            and

 

●the
                                            potential for approval policies or regulations of the FDA to change significantly in a manner
                                            rendering our data or regulatory filings insufficient for clearance or approval.

 


24
 

 
In
addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take
other actions, which may prevent or delay approval or clearance of our product candidate or impact our ability to modify our product
candidate after clearance on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could
delay our ability to obtain clearance for our pump, increase the costs of compliance or restrict our ability to maintain our current
approval.
 
As
a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based,
among other things, on the evaluation of data supporting the safety and performance of the product candidates during normal conditions
of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use,
that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended
performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.
 
Obtaining
marketing authorization in the United States will not obviate the need to obtain marketing authorization in other jurisdictions We must
obtain approval from foreign regulatory authorities before we can market and sell any of our product candidates in countries outside
the United States. We will incur additional costs in seeking such approvals, may experience delays in obtaining such approvals and cannot
be certain that such approvals will be granted.
 
The
development, manufacture, and marketing of our product candidates outside the United States is subject to government regulation. In most
foreign countries, we must complete rigorous pre-clinical testing and extensive human clinical trials that demonstrate the safety and
efficacy of a product in order to apply for regulatory approval to market the product. If foreign regulatory authorities grant regulatory
approval of a product, the approval may be limited to specific indications or limited with respect to its distribution. Expanded or additional
indications for approved devices may not be approved, which could limit our potential revenues. Foreign regulatory authorities may refuse
to grant any approval. Consequently, even if we believe that pre-clinical and clinical data are sufficient to support regulatory approval
for our products, foreign regulatory authorities may not ultimately grant approval for commercial sale in any jurisdiction. If our product
candidates are not approved in such jurisdictions, our ability to generate revenues will be limited and our business will be adversely
affected.
 
Our
competitors may develop products that are more effective, safer and less expensive than ours.
 
Existing
insulin pumps are expensive, with the more popular models having purchase prices exceeding $4,000 for individuals without health insurance
and often require significant patient copays. Others have daily use costs that exceed the reimbursement rates of many health insurance
plans, forcing some users to spend thousands of dollars a year in copays. We believe this makes insurers hesitant to pay for any pumps
and places pumps out of reach for many patients who cannot afford such out of pocket expenses.
 
We
are engaged in the diabetes treatment sector of the healthcare marketplace, which is intensely competitive. There are current products
that are quite effective at addressing the effects of diabetes, and we expect that new developments by other companies and academic institutions
in the areas of diabetes treatment will continue. If approved for marketing by the FDA, depending on the approved clinical indication,
our product will be competing with existing and future products related to treatments for diabetes.
 
Our
competitors may:
 


 
●
develop product candidates
    and market products that increase the levels of safety or efficacy that our product candidates will need to show in order to obtain
    regulatory approval;

 


 
●
develop product candidates
    and market products that are less expensive or more effective than ours;

 


 
●
commercialize competing
    products before we can launch any products we are working to develop;

 


 
●
hold or obtain proprietary
    rights that could prevent us from commercializing our products; or

 


 
●
introduce therapies or
    market medical products that render our potential product candidates obsolete.

 
We expect to compete against large medical device
companies, such as Medtronic, Inc., Tandem Diabetes Care, Inc. and Insulet Corporation, smaller companies that are collaborating with
larger medical device companies, new companies, academic institutions, government agencies and other public and private research organizations.
These competitors, in nearly all cases, produce similar products relative to the treatment of diabetes and have substantially greater
financial resources than we do. Our competitors also have significantly greater experience in:

 


 
●
developing medical device
    and other product candidates;

 


 
●
undertaking testing and
    clinical studies;

 


 
●
building relationships
    with key customers and opinion-leading physicians;

 


 
●
obtaining and maintaining
    FDA and other regulatory approvals;

 


25
 

 


 
●
formulating and manufacturing
    medical devices;

 


 
●
launching, marketing and
    selling medical devices;

 

●providing
                                            management oversight for all of the above-listed operational functions; and

 

●obtaining
                                            insurance coverage and reimbursement for their competitive products.

 
If
we fail to achieve acceptance over other existing or newly developed products, we may be unable to obtain regulatory approval or successfully
commercialize our MODD1 insulin pump product candidate or any future products. If our competitors’ market medical devices that
are less expensive, safer or more effective than our insulin pump, or that gain or maintain greater market acceptance, we may not be
able to compete effectively, which would adversely affect our business, prospects, results of operations and financial condition. See
“Business - Competition.”
 
We
expect to rely on third-party manufacturers and will be dependent on their quality and effectiveness.
 
Our
insulin pump requires precise, high-quality manufacturing. The failure to achieve and maintain high manufacturing standards, including
failure to detect or control anticipated or unanticipated manufacturing errors or the frequent occurrence of such errors, could result
in patient injury or death, discontinuance or delay of ongoing or planned clinical studies, delays or failures in product testing or
delivery, cost overruns, product recalls or withdrawals and other problems that could seriously hurt our business. Contract medical device
manufacturers often encounter difficulties involving production yields, quality control and quality assurance and shortages of qualified
personnel. These manufacturers are subject to stringent regulatory requirements, including the FDA’s current good-manufacturing-practices
regulations. If our contract manufacturers fail to maintain ongoing compliance at any time, the production of our product could be interrupted,
resulting in delays or discontinuance of our clinical studies, additional costs and loss of potential revenues.
 
We
may not be able to successfully scale-up manufacturing of our product candidate in sufficient quality and quantity, which would delay
or prevent us from developing our product candidate and commercializing our product candidate.
 
In
order to conduct larger-scale or late-stage clinical studies and for commercialization of our insulin pump, if 510(k) clearance is granted,
we will need to manufacture it in larger quantities. We may not be able to successfully increase the manufacturing capacity for our product
candidate in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we are
unable to successfully scale up the manufacture of our product candidate in sufficient quality and quantity, the development and testing
of our product candidate and regulatory approval or commercial launch may be delayed, which could significantly harm our business.
 
We
are dependent upon third-party suppliers to manufacture our product, and this makes us vulnerable to supply shortages and price increases;
we may not be able to obtain an adequate supply of components on a timely basis or at all.
 
The
future manufacture of our product will require the timely delivery of sufficient amounts of components from multiple suppliers in various
countries. We intend to work closely with our suppliers to ensure continuity of supply, but we cannot guarantee these efforts will be
successful. Due to the supply chain issues experienced by the semiconductor industry, at times, we have experienced delays obtaining
integrated circuits from certain suppliers. We may need to enter into “take or pay” contracts with suppliers. We have also
seen price increases for various components. We do not have supply agreements with any of our suppliers, and we make purchases based
on individual purchase orders. An interruption, delay, or inability to obtain components from our third-party suppliers at acceptable
prices in a timely manner, could hinder our ability to manufacture our products and have a material adverse effect on our business, prospects,
financial condition and results of operations.
 
We
may be subject to potential product liability and other claims that could materially impact our business and financial condition.
 
The
development and sale of our insulin pump exposes us to the risk of significant damages from product liability and other claims, and the
use of our product in clinical studies may result in adverse effects from liability claims. We cannot predict all the possible harms
or adverse effects that may result. We intend to obtain product liability insurance to provide some protection from claims. Nonetheless,
we may not have sufficient resources to pay for any liabilities resulting from a personal injury or other claim, even if it is partially
covered by insurance. In addition to the possibility of direct claims, we may be required to indemnify third parties against damages
and other liabilities arising out of our development, commercialization and other business activities, which would increase our liability
exposure. If third parties that have agreed to indemnify us fail to do so, we may be held responsible for those damages and other liabilities
as well.
 


26
 

 
Legislative,
regulatory, or medical cost reimbursement changes may adversely impact our business.
 
New
laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to the health
care system in the U.S. and in other jurisdictions may change the nature of and regulatory requirements relating to innovations in medical
devices, testing and regulatory approvals, limit or eliminate payments for medical procedures and treatments, or subject the pricing
of medical devices to government control. In addition, third-party payors in the U.S. are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement of new products. Consequently, significant uncertainty exists as to the
reimbursement status of newly approved health care products. Significant changes in the health care system in the U.S. or elsewhere,
including changes resulting from adverse trends in third-party reimbursement programs, could have a material adverse effect on our projected
future operating results and our ability to raise capital, commercialize products, and remain in business.
 
We
are subject to extensive regulation by the FDA, which could restrict the sales and marketing of our insulin pump and could cause us to
incur significant costs.
 
Our
insulin pump is subject to extensive regulation by the FDA. These regulations relate to manufacturing, labeling, sale, promotion, distribution
and shipping. Before a new medical device, or a new intended use of a legally marketed device, can be marketed in the United States,
it must be cleared or approved by FDA through the applicable premarket review process (510(k), PMA, or de novo classification), unless
an exemption applies. If we receive 510(k) clearance for our insulin pump, we may be required to obtain new 510(k) clearances for significant
post-market modifications to the pump. Each premarket submission and review process can be expensive and lengthy, and entail significant
user fees, unless exempt.
 
Medical
devices may be marketed only for the indications for which they are approved or cleared. Further, 510(k) clearance can be revoked if
safety or effectiveness problems develop once the device is on the market.
 
The
current regulatory requirements to which we are subject may change in the future in a way that adversely affects us. If we fail to comply
with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by the FDA, which may
include any of the following sanctions:
 


 
●
untitled letters, warning
    letters, fines, injunctions, consent decrees and civil penalties;

 


 
●
customer notification,
    or orders for repair, replacement or refunds;

 


 
●
voluntary or mandatory
    recall or seizure of our current or future products;

 


 
●
administrative detention
    by the FDA of medical devices believed to be adulterated or misbranded;

 


 
●
imposing operating restrictions,
    suspension or shutdown of production;

 


 
●
refusing our requests for
    510(k) clearance, PMA or de-novo classification of any new products, new intended uses or modifications to our insulin
    pump;

 


 
●
rescinding 510(k) clearance
    that has already been granted; and

 


 
●
criminal prosecution.

 
The
occurrence of any of these events would have a material adverse effect on our business, financial condition and results of operations
and could result in stockholders losing their entire investment.
 


27
 

 
Although
our insulin pump product candidate does not presently require clinical trials to apply to the FDA for clearance and even if a clinical
trial is completed, the results of our clinical testing may not demonstrate the safety and efficacy of the device or may be equivocal
or otherwise not be sufficient for us to obtain approval of our product candidate.
 
Clinical trials are almost always required to
support a PMA application and may also be required to support 510(k) submissions although at this time ours does not require a PMA. If
the device presents a “significant risk” to human health as defined by the FDA, the FDA requires the study sponsor to submit
an investigational device exemption (“IDE”) application and obtain IDE approval prior to commencing human clinical trials.
The IDE must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device
in humans and that the testing protocol is scientifically sound. An IDE will automatically become effective 30 days after receipt by the
FDA, unless the FDA denies the application or notifies the sponsor that the investigation is on hold and may not begin until the sponsor
provides supplemental information about the investigation that satisfies the agency’s concerns. The FDA may also notify the sponsor
that the study is approved as proposed. If the FDA determines that there are deficiencies or other concerns with an IDE that require modification
of the study, the FDA may permit a clinical trial to proceed under conditional approval. Furthermore, the agency may withdraw approval
of an IDE under certain circumstances. Clinical trials for a significant risk device may begin once an IDE is approved by the FDA and
the appropriate Institutional Review Board (“IRB”) at each clinical trial site. If the product is deemed a “non-significant
risk” device, IDE approval from the FDA would not be required, but the clinical trial would need to meet other requirements including
IRB approval. Our clinical trials must be conducted in accordance with FDA regulations and federal and state regulations concerning human
subject protection, including informed consent and healthcare privacy. A clinical trial may be suspended by the FDA or at a specific site
by the relevant IRB at any time for various reasons, including a determination that the risks to the trial participants outweigh the benefits
of participation in the clinical trial. Even if a clinical trial is completed, the results of our clinical testing may not demonstrate
the safety and efficacy of the device or may be equivocal or otherwise not be sufficient for us to obtain approval of our product.

  
Our
success depends substantially upon our ability to obtain and maintain intellectual property protection relating to our product candidate
and research technologies.
 
We have applied to the U.S. Patent and Trademark
Office (the “USPTO”) and various foreign patent agencies for patents on our proprietary fluid movement technology and our
insulin delivery methodology. To date, the USPTO has granted four patents to us, and we have additional applications pending and in various
stages of review by the USPTO and foreign patent agencies. There can be no assurance that we will be issued additional patents by the
USPTO or foreign patent agencies and that any of our patents will prevent other companies from competing with us. We will continue to
attempt to patent our innovations, as appropriate, to help ensure a sustainable competitive advantage. 
Due
to evolving legal standards relating to the patentability, validity and enforceability of patents covering health care product inventions,
our ability to enforce our existing patents and to obtain and enforce patents that may issue from any pending or future patent applications
is uncertain and involves complex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth
of claims allowed in medical device patents. Thus, we cannot be sure that any patents will issue from any pending or future patent applications
owned by or licensed to us. Even if patents do issue, we cannot be sure that the claims of these patents will be held valid or enforceable
by a court of law, will provide us with any significant protection against competing products, or will afford us a commercial advantage
over competitive products. If, at some point in the future, one or more products resulting from our product candidates is approved for
sale by the FDA and we do not have adequate intellectual property protection for those products, competitors could duplicate them for
approval and sale in the United States without repeating the extensive testing required of us to obtain FDA approval.
 
If
we are sued for infringing on third-party intellectual property rights, it will be costly and time-consuming, and an unfavorable outcome
would have a significant adverse effect on our business.
 
Our
ability to commercialize our product candidate depends on our ability to use, manufacture and sell our product candidate without infringing
the patents or other proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications owned
by third parties exist in the diabetes medical device area. There may be existing patents, unknown to us, on which our activities with
our insulin pump candidate could infringe.
 
If
a third party claims that our actions infringe on its patents or other proprietary rights, we could face a number of issues that could
materially harm our competitive position, including, but not limited to:
 


 
●
infringement and other
    intellectual property claims that, even if meritless, can be costly and time-consuming, delay the regulatory approval process and
    divert management’s attention from our core business operations;

 


 
●
an order that we pay substantial damages for infringement, including consequential damages for lost of profits or market share, if a
    court determines that our products or technologies infringe on a third party’s patent or other proprietary rights;

 


28
 

 


 
●
a court prohibiting us
    from selling or licensing our products or technologies unless the holder licenses the patent or other proprietary rights to us, which
    it is not required to do; and

 


 
●
even if a license is available
    from a holder, we may have to pay substantial royalties or grant cross-licenses to our patents or other proprietary rights.

 
If
any of these events occur, it could significantly harm our operations and financial condition and negatively affect our stock price.
 
If
we are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely
affected.
 
In
addition to patented technology and technology for which patent protection is being sought, we rely on our unpatented technology, trade
secrets and know-how. We generally seek to protect this information by confidentiality, non-disclosure and assignment of invention agreements
with our officers, employees, contractors and other service providers and with parties with which we do business. These agreements may
be breached, which breach may result in the misappropriation of such information, and we may not have adequate remedies for any such
breach. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of our technology.
 
Moreover,
our trade secrets may be disclosed to or otherwise become known or be independently developed by competitors. To the extent that our
officers, employees, contractors, other service providers, or other third parties with whom we do business use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If, for any
of the above reasons, our intellectual property is disclosed or misappropriated, it would harm our ability to protect our rights and
have a material adverse effect on our business, financial condition, and results of operations.
  
Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.
 
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations,
and may not adequately protect our business, or permit us to gain and maintain a competitive advantage. The following examples are illustrative:
 


 
●
others may be able to make
    devices that are similar to our insulin pump but that are not covered by the claims of the patents that we own;

 


 
●
we or any collaborators
    might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own;

 


 
●
we might not have been
    the first to file patent applications covering certain of our inventions;

 


 
●
others may independently
    develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

 


 
●
it is possible that our
    pending patent applications will not lead to issued patents;

 


 
●
issued patents that we
    own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;

 


 
●
our competitors might conduct
    research and development activities in the U.S. and other countries that provide a safe harbor from patent infringement claims for
    certain research and development activities, as well as in countries where we do not have patent rights, and then use the information
    learned from such activities to develop competitive products for sale in our major commercial markets; and

 


 
●
we may not develop additional
    proprietary technologies that are patentable.

 


29
 

 
Healthcare
reform and drug-pricing reform laws could adversely affect our product candidate and financial condition.
 
In
the United States, there have been, and continue to be, a number of legislative initiatives to contain healthcare costs. In March 2010,
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (ACA), was
enacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private
insurers. Among other ways in which it may affect our business, the ACA implemented payment system reforms, including a national pilot
program on payment bundling to encourage hospitals, physicians, and other providers to improve the coordination, quality, and efficiency
of certain healthcare services through bundled payment models and expanded the eligibility criteria for Medicaid programs. Since its
enactment, there have been judicial, executive, and Congressional challenges to certain aspects of the ACA. It is unclear how the ACA
and its implementation, as well as efforts to repeal or replace, or invalidate, the ACA, or portions thereof, will affect our insulin
pump or our business. Additional legislative changes, regulatory changes, and judicial challenges related to the ACA remain possible.
It is possible that the ACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may
be adopted in the future, could have an adverse effect on our industry generally and on our ability to commercialize our insulin pump
and achieve profitability. We have assumed in all of our financial projections that there is not an increase in the reimbursement for
our product through the pharmacy or durable medical equipment routes.
 
Drug pricing continues to be a subject of debate
at the executive and legislative levels of U.S. government. The American Rescue Plan Act of 2021 eliminated the statutory cap on rebates
that drug manufacturers pay to Medicaid beginning January 1, 2024. With the elimination of the rebate cap, manufacturers may be required
to compensate states in an amount greater than what the state Medicaid programs pay for the drug. Additionally, the Inflation Reduction
Act of 2022 contains substantial drug pricing reforms, including the establishment of a drug price negotiation program within the U.S.
Department of Health and Human Services that would require manufacturers to charge a negotiated “maximum fair price” for
certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain
drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide
discounts on Part D drugs. Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the Inflation
Reduction Act of 2022. The Inflation Reduction Act of 2022 could have the effect of reducing the prices we can charge and reimbursement
we receive for our products, if approved, thereby reducing our profitability, and could have a material adverse effect on our financial
condition, results of operations and growth prospects. The effect of Inflation Reduction Act of 2022 on our business and the pharmaceutical
industry in general is not yet known. 
At
the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect
that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement
and reduced demand for our products, once approved, or additional pricing pressures.
 
These
and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and in additional
downward pressure on the price that we receive for any current product or future product candidate. Any reduction in reimbursement from
Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation
of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or
commercialize our products. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales
and promotional activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations,
guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any current or future product
candidates, if any, may be. In addition, increased Congressional scrutiny of the FDA’s approval process may significantly delay
or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. 
 


30
 

 
Even
if we are able to obtain all regulatory approvals and have completed all other steps needed to be taken to commercialize our insulin
pump, if we or any contract manufacturers we select fails to comply with the FDA’s quality system regulations, the manufacturing
and distribution of our product candidate could be interrupted, and our product sales and operating results could suffer.
 
We
have established initial, low-volume manufacturing capability in our facility, and we have selected an initial, tier one contract manufacturer.
We and the contract manufacturer of our insulin pump will be required to comply with the FDA’s quality system regulations, which
impose a complex regulatory framework that covers the procedures and documentation of the design, testing, production, control, quality
assurance, labeling, packaging, sterilization, storage and shipping of medical devices. The FDA enforces its quality system regulations
through periodic unannounced inspections. We cannot assure you that, in the future, any manufacturing facilities owned by us or any contract
manufacturer will pass any quality system inspection. In the event that our or any contract manufacturer’s facilities fails a quality
system inspection, the manufacturing or distribution of our product candidate could be interrupted and our operations disrupted. Failure
to take adequate and timely corrective action in response to an adverse quality system inspection could force a suspension or shutdown
of any packaging and labeling operations or then manufacturing operations of any contract manufacturers, or a recall of our insulin pump.
If any of these events were to occur, we at such time would not be able to provide our customers with the quantity of insulin pumps that
they require on a timely basis, our reputation could be harmed and we could lose any customers we then have, any or all of which could
have a material adverse effect on our business, financial condition and results of operations.
 
We
may bring infringement claims or other legal proceedings against third parties, causing us to spend substantial resources on litigation
and exposing our own intellectual property portfolio to challenge.
 
We
may come to believe that third parties are infringing on our patents or other proprietary rights. To prevent infringement or unauthorized
use, we may need to file infringement and/or misappropriation suits, which are very expensive and time-consuming, could result in meritorious
counterclaims against us and would distract management’s attention. Also, in an infringement or misappropriation proceeding, a
court may decide that one or more of our patents is invalid, unenforceable, or both, in which case third parties may be able to use our
technology without paying license fees or royalties. Even if the validity of our patents is upheld, a court may refuse to stop the other
party from using the technology at issue on the grounds that the other party’s activities are not covered by our patents. See “Business
- Patents,” below.
 
We
may become involved in disputes with our present or future contract partners over intellectual property ownership or other matters, which
would have a significant effect on our business.
 
Inventions discovered in the course of performance
of contracts with third parties or contractors may become jointly owned by such third-party contractors and us, in some cases, and the
exclusive property of one of us, in other cases. Under some circumstances, it may be difficult to determine who owns a particular invention
or whether it is jointly owned, and disputes could arise regarding ownership or use of those inventions or jointly developed improvements
thereto. Other disputes may also arise relating to the performance or alleged breach of our agreements with third parties. Any disputes
could be costly and time-consuming, and an unfavorable outcome could have a significant adverse effect on our business. 
Assuming
our insulin pump receives FDA clearance or approval, our insulin pump will still be subject to recalls, which would harm our reputation,
business operations and financial results.
 
Even
assuming we obtain FDA approval or clearance with regard to our insulin pump, the FDA has the authority to require the recall of our
pump if we commence manufacturing of our insulin pump and we or any contract manufacturers we retain fail to comply with relevant regulations
pertaining to manufacturing practices, labeling, advertising or promotional activities, or if new information is obtained concerning
the safety or efficacy of the device. A government-mandated recall could occur if the FDA finds that there is a reasonable probability
that our device would cause serious, adverse health consequences or death. A voluntary recall by us could occur as a result of manufacturing
defects, labeling deficiencies, packaging defects or other failures to comply with applicable regulations. Any recall would divert management’s
attention and financial resources and harm our reputation with customers. A recall involving our insulin pump would be particularly harmful
to our business, financial condition and results of operations because it is currently our only product candidate.
 


31
 

 
Any
disruption and/or instability in economic conditions and capital markets could adversely affect our ability to access the capital markets,
and thus adversely affect our business and liquidity.
 
Negative
economic conditions and instability or uncertainty in the financial markets could have a negative impact on our ability to access the
capital markets, and thus have a negative impact on our then operations and liquidity. We face certain risks in the event of a sustained
deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our
banking, cash management and custodial financial institutions. A general shortage of liquidity and credit combined with the substantial
losses in worldwide equity markets could lead to an extended worldwide recession in the future. If such occurred, we would face significant
challenges if conditions in the capital markets did not improve. Our ability to access the capital markets under such circumstances could
be severely restricted at a time when we need to access such markets, which could have a negative impact on our business plans. Even
if we are able to raise capital under such circumstances, it may not be at a price or on terms that are favorable to us. We cannot predict
the occurrence of future disruptions or how long such negative conditions might continue.
 
Because
our current insulin pump is still in the pre-clearance stage with the FDA, it does not have reimbursement and is not approved for insurance
coverage. If in the future we are cleared for and are otherwise able to commercialize our insulin pump, but are unable to obtain adequate
reimbursement or insurance coverage for such product candidate from third-party payors, we will be unable to generate significant revenue.
 
Because
our current insulin pump is still in the pre-clearance stage with the FDA, it is not eligible for reimbursement and is not approved for
insurance coverage. The future availability of insurance coverage and reimbursement for newly approved medical devices is highly uncertain.
In the United States, patients using insulin pumps are generally reimbursed for all or part of the product cost by Medicare or other
third-party payors. Any future commercial success of our insulin pump will be substantially dependent on whether third-party coverage
and reimbursement is available for future customers. Medicare, Medicaid, health maintenance organizations and other third-party payors
are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new medical devices,
and, as a result, they may not cover or provide adequate reimbursement for our insulin pump, assuming we are able to fully develop and
obtain all regulatory approval to market it in the United States. In addition, in certain countries, no uniform policy of coverage and
reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement for medical
device products and services can differ significantly from payor to payor. In addition, payors continually review new technologies for
possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination
process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our
products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained or maintained, if obtained.
Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals
must be obtained on a country-by-country basis. In many international markets, a product must be approved for reimbursement before it
can be approved for sale in that country. Further, many international markets have government-managed healthcare systems that control
reimbursement for new devices and procedures. Accordingly, unless government and other third-party payors provide coverage and reimbursement
for our insulin pump, patients may not use it, which would cause investors to lose their entire investment.
 
Third
parties might attempt to gain unauthorized access to our network or seek to compromise our insulin pump product.
 
Our
business is dependent on the security and efficacy of our networks and computer and data management systems, and we rely on our internal
computer networks for many of the systems we use to operate our business generally. From time to time, we may face attempts by others
to gain unauthorized access through the Internet or otherwise or to introduce malicious software to our information technology systems.
We or our products may be a target of computer hackers, organizations or malicious attackers who attempt to:
 

●gain
                                            access to our network;

 

●steal
                                            proprietary information related to our business, products and employees; or

 

●interrupt
                                            our systems.

 
From
time to time, we may encounter attempts at gaining unauthorized access to our network, and we periodically run security checks. While
we seek to detect and investigate unauthorized attempts and attacks against our network and products of which we become aware, and to
prevent their recurrence where practicable through changes to our internal processes and tools and/or changes to our products, we remain
potentially vulnerable to additional known or unknown threats. In addition to intentional security breaches, the integrity and confidentiality
of Company and customer data and our intellectual property may be compromised as a result of human error, product defects, or technological
failures. Different geographic markets may have different regulations regarding data protection, raising potential compliance risks.
Further, retaliatory acts by foreign governments or terrorist organizations in response to policies of the United States government could
include cyber attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly.
 


32
 

 
Any
failure or perceived failure by us or our service providers to prevent information security breaches or other incidents or system disruptions,
or any compromise of security that results in or is perceived or reported to result in unauthorized access to, or loss, theft, alteration,
release or transfer of, our information, or any personal information, confidential information, or other data could result in loss or
theft of proprietary or sensitive data and intellectual property, could harm our reputation and competitive position and could expose
us to legal claims, regulatory investigations and proceedings, and fines, penalties, and other liability. Any such actual or perceived
security breach, incident or system disruption could also divert the efforts of our personnel, and could require us to incur significant
costs and operational consequences in connection with investigating, remediating, eliminating and putting in place additional tools,
devices, policies, and other measures designed to prevent actual or perceived security breaches and other incidents and system disruptions,
and in, for example, rebuilding internal systems, reduced inventory value, providing modifications to our products and services, defending
against claims and litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps with respect
to third parties. Moreover, we could be required or otherwise find it appropriate to expend significant capital and other resources to
respond to, notify third parties of, and otherwise address the incident or breach and its root cause, and to notify individuals, regulatory
authorities and others of security breaches involving certain types of data.
 
Further,
we cannot assure that any limitations of liability provisions in our current or future contracts that may be applicable would be enforceable
or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security
breach or other security-related matter. We also cannot be sure that any insurance coverage will continue to be available on acceptable
terms or will be available in sufficient amounts to cover claims related to a security breach or incident, or that the insurer will not
deny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the
occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements,
could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
 
We
are subject to oversight by the SEC and other regulatory agencies. Investigations by those agencies could divert management’s focus
and could have a material adverse effect on our reputation and financial condition.
 
We
are subject to the regulation and oversight of the SEC and state regulatory agencies, in addition to the FDA. As a result, we may face
legal or administrative proceedings by these agencies. We are unable to predict the effect of any investigations on our business, financial
condition or reputation. In addition, publicity surrounding any investigation, even if ultimately resolved in our favor, could have a
material adverse effect on our business.
 
We
are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller
reporting companies, our common stock may be less attractive to investors.
 
We
are a “smaller reporting company,” and are subject to lesser disclosure obligations in our SEC filings compared to other
issuers. Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in
their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public
accounting firms provide an attestation report on the effectiveness of internal control over financial reporting and have certain other
decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited
financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company”
may make it harder for investors to analyze our operating results and financial prospects.
 
We
do not expect any cash dividends to be paid on our shares of common stock for the foreseeable future.
 
We
have never declared or paid a cash dividend and we do not anticipate declaring or paying dividends on our common stock for the foreseeable
future. We expect to use future financing proceeds and earnings, if any, to fund operating expenses. Consequently, stockholders’
only opportunity to achieve a return on their investment is if the price of our stock appreciates and they sell their shares at a profit.
We cannot assure stockholders of a positive return on their investment when they sell their shares or that stockholders will not lose
the entire amount of their investment.
 


33
 

 
If
the beneficial ownership of our common stock continues to be highly concentrated, it may prevent our stockholders from influencing significant
corporate decisions.
 
As of March 31, 2024, our executive officers,
directors and certain persons, who may be deemed affiliates, beneficially owned approximately 24% of our issued and outstanding common
stock. Specifically, James Besser, our chief executive officer, and Morgan Frank, a member of our board of directors, were the beneficial
owners of approximately 13% of our outstanding common stock. As a result, such persons may exercise substantial influence over the outcome
of corporate actions requiring stockholder approval including, without limitation, the election of directors, certain mergers, consolidations
and sales of all or substantially all of our assets or any other significant corporate transactions. Such persons may also vote against
a change of control, even if such a change of control would benefit our other stockholders. Thus, investors in our common stock cannot
reasonably expect to have any influence over the election of our directors or other matters submitted to a vote of our stockholders. Instead,
our existing significant stockholders may exert a substantial influence on the election of our directors and any actions requiring or
otherwise put to a stockholder vote, potentially in a manner that you do not support. The concentrated amount of control over our affairs
held by a relatively few significant investors could serve to reduce the attractiveness or liquidity of our common stock, and thereby
depress its trading price. Additionally, conflicts of interest may arise between these executive officers, directors and other affiliates,
on the one hand, and us and our other stockholders, on the other hand. In resolving these conflicts of interests, these investors may
favor their own interests and the interests of their affiliates, over the interests of our other stockholders, which could cause a material
adverse effect on our business, prospects, financial condition and results of operations.

  
Future
sales of our securities could adversely affect the market price of our common stock and our future capital-raising activities could involve
the issuance of equity securities, which would dilute your investment and could result in a decline in the trading price of our common
stock.
 
We
may sell securities in the public or private equity markets at prices per share below the current market price of our common stock, even
if we do not have an immediate need for additional capital at that time. Sales of substantial amounts of shares of our common stock,
or the perception that such sales could occur, could adversely affect the prevailing market price of our shares and our ability to raise
capital. We may issue additional shares of common stock in future financing transactions or as incentive compensation for our executive
management and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests
represented by our then-outstanding shares of common stock. Moreover, sales of substantial amounts of shares in the public market, or
the perception that such sales could occur, may adversely affect the prevailing market price of our common stock and make it more difficult
for us to raise additional capital. Such resulting significant downward pressure on the price of our common stock could also encourage
short sales by third parties. Such an event could place further downward pressure on the price of our common stock.
 
Our
articles of incorporation allow for our board of directors to create new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our common stock.
 
Our
board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Currently, our board
of directors has the authority to designate and issue up to 5,000,000 shares of our preferred stock without further stockholder approval.
In the future, our board of directors could authorize the issuance of one or more series of preferred stock that would grant to holders,
among other rights, the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed
to the holders of common stock and the right to the redemption of our preferred shares acquired by such persons, together with a premium,
prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred
stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative
voting power of our common stock or result in dilution to our existing stockholders.
 


34
 

 
If
we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately
or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely
affect the trading price of our common stock.
 
Effective
internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed,
and our business and reputation with investors may be harmed. If we are unable to maintain effective internal controls, we may not have
adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations as a public company, including
the requirements of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act). In addition, we may be unable to accurately report our financial
results in future periods or report them within the timeframes required by the requirements of the SEC or the Sarbanes-Oxley Act. Failure
to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially subject us to sanctions or investigations by the
SEC or other regulatory authorities. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter
in their implementation, could result in identification of additional material weaknesses or significant deficiencies, cause us to fail
to meet our reporting obligations or result in material misstatements in our financial statements.
 
Furthermore,
Section 404 of the Sarbanes-Oxley Act and related regulations require our management to evaluate the effectiveness of our internal control
over financial reporting as of the end of each fiscal year. Based on its evaluation, our management concluded that our internal controls
over financial reporting were effective as of March 31, 2024. We cannot provide assurance that, in the future, a material weakness or
significant deficiency will not exist or otherwise be discovered. If that were to happen, it could harm our operating results and cause
stockholders to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the
trading price of our securities.
 
Sustained
inflation could have a material adverse effect on our business, financial condition, results of operations and liquidity.
 
Inflation
rates in the United States have remained high and may continue to rise. Inflation over the last several months has led us to experience
higher costs, including, among others, labor and transportation. Some of our suppliers have raised their prices and may continue to raise
prices, and, assuming we achieve FDA clearance and commence commercialization of our product, in the future, we may not be able to make
corresponding price increases to obtain adequate gross margins and achieve profitability. If inflation rates continue to rise or remain
elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations
and liquidity.
 
Our
board of directors is able to adopt recapitalizations through forward or reverse splits of our outstanding shares of common stock without
stockholder approval.
 
Pursuant
to our amended and restated articles of incorporation, our board of directors has the power, without obtaining stockholder approval,
to effectuate recapitalizations of us through forward or reverse splits of our outstanding common stock. As a result of such provision,
our board of directors can implement recapitalizations of us by effectuating a forward or reverse stock split of our outstanding common
stock, which would increase or decrease each of our stockholder’s number of shares owned, and our stockholders will have no right
to approve or disapprove any such action even if such actions have a material adverse effect on them.
 


35
 

 
ITEM
1B. UNRESOLVED STAFF COMMENTS
 
None
 
Item
1C. CYBERSECURITY.
 
We believe a robust
and proactive approach to cybersecurity risks and threats is essential to achieving our strategic business objectives and protecting
our business. We may face a wide range of cybersecurity threats, such as ransomware and denial-of-service attacks. Our customers, suppliers
and other business partners may also face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these third
parties could have a material adverse effect on our business and results of operations. Due to the risks that cybersecurity threats can
pose to our business, we intend to continually evaluate best practices and methods, including cyber defense systems and training programs,
to protect our business from a wide range of potential threats.  
We continue to evaluate
our cybersecurity control processes and procedures to address the evolving cybersecurity risks that we may face in an increasingly technically
capable environment. We are implementing policies to educate and provide guidance to our personnel, including awareness programs and
other related cybersecurity best practices. We plan to conduct technical risk assessments to identify cybersecurity threats, as well
as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to
such cybersecurity threats. We also plan to conduct programmatic risk assessments, including identification of reasonably foreseeable
internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies,
procedures, systems, and safeguards in place to manage such risks. Following these risk assessments, we will evaluate: i) whether and
how to implement, and maintain reasonable safeguards to minimize identified risks, ii) how to reasonably address any identified gaps
in existing safeguards; and how to regularly monitor the effectiveness of our safeguards. As we are a small pre-revenue company, we currently
outsource our information technology (IT) functions to a third party. Working with the outsourced IT firm, our president will manage
the risk assessment and mitigation process. Third parties will play an important role in our cybersecurity program. We intend to engage
third-party service providers to conduct evaluations of our security controls, including penetration testing and consulting on best practices.
The third-party services include testing both the design and operational effectiveness of security controls. This dependence exposes
us, along with others who use such service providers, to the impact of a cyber-attack on their service providers. It is possible for
a cyber-attack at a third-party service provider to have a significant financial, operational, or reputational impact to us. To reduce
the effective impact to us of a cyber-attack on a third-party service provider, we intend to monitor the risks associated with our service
providers through periodic review of these providers’ cybersecurity programs. 
Our
board of directors, through its audit committee, oversees our processes for identifying and mitigating risks, including cybersecurity
risks. Management will periodically brief the audit committee and/or the board of directors on our cybersecurity and information security
policies and plans. Our board of directors will be apprised of cybersecurity incidents deemed to have a moderate or higher business impact,
and we will provide updates on management’s incident response plan for addressing and mitigating any impacts and risks associated
with such an incident. We intend to develop a formal incident response plan, which sets forth the steps to be followed from incident
detection and assessment to mitigation, recovery and notification and reporting within our organization and to our board of directors.
 
For additional information
regarding whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect us, including
our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this Report,
including the risk factor entitled “Third parties might attempt to gain unauthorized access to our network or seek to compromise
our insulin pump product.” 
ITEM
2. PROPERTIES
 
Our
principal administrative, operations, and research and development functions are located in a leased facility in San Diego, California.
We currently occupy approximately 24,000 square feet of space in the San Diego facility, and the lease extends through January 2027.
Under the lease, in addition to the minimum lease payments, we are responsible for property taxes, insurance and certain other operating
costs. We believe that our existing facility is adequate to meet our current needs.
 
ITEM
3. LEGAL PROCEEDINGS
 
We
are not a party to any material legal proceeding that we believe is likely to have a material adverse effect on our consolidated financial
position or results of operations. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management
efforts. to any pending legal proceeding. To the knowledge of our management, no federal, state or local governmental agency is presently
contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more
than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.
 
ITEM
4. MINE SAFETY DISCLOSURES
 
Not
applicable.
 


36
 

 
PART
II
 
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market
Information for Common Stock
 
Our common
stock is currently listed on the Nasdaq Capital Market under the symbol “MODD.”
 
Authorized
Capital
 

The Company is authorized
by its Certificate of Incorporation to issue an aggregate of up to 5,000,000 shares of preferred stock, $0.001 par value per share, and
100,000,000 shares of common stock, $0.001 par value per share. As of March 31, 2024, zero and 32,463,670 shares of preferred stock and
common stock, respectively, were issued and outstanding.
  
Holders
of Record
 
As
of March 31, 2024, we had 69 stockholders of record. The actual number of stockholders is greater than this number of stockholders of
record and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This
number of stockholders of record also does not include stockholders whose shares may be held in trust by other entities.
 
Securities
Authorized for Issuance under Equity Compensation Plan
 
For
information regarding securities authorized for issuance under equity compensation plans, please refer to Item 12, Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
Dividend
Policy
 
We
have never declared or paid any cash dividend on our capital stock. We do not anticipate paying any cash dividends in the foreseeable
future and we intend to retain all of our earnings, if any, to finance our growth and operations and to fund the expansion of our business.
Payment of any dividends will be made in the discretion of our board of directors, after taking into account various factors, including
our financial condition, operating results, current and anticipated cash needs and plans for expansion. Any dividends that may be declared
or paid on our common stock, must also be paid in the same consideration or manner, as the case may be, on our shares of preferred stock,
if any.
 
Recent
Sales of Unregistered Securities
 
Set
forth below is information regarding securities issued by us within the past two years that were not registered under the Securities
Act. Also included is the consideration, if any, received by us for such issuances, and information relating to the section of the Securities
Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.
 
Director
Compensation
 
On
each of March 31, 2024, December 30, 2023, and June 30, 2023 we issued 6,375 shares of our common stock to four of our non-employee directors
in accordance with our Outside Director Compensation Plan (the “Director Plan”). On September 30, 2023, we issued 6,265 shares
of our common stock to four of our non-employee directors in accordance with the Director Plan. On March 31, 2023, December 30, 2022
and September 30, 2022, we issued 6,375 shares of our common stock to four of our non-employee directors in accordance with the Director
Plan. On August 8, 2022, we issued 5,000 shares of our common stock to two of our non-employee directors in accordance with the Director
Plan. On June 30, 2022, we issued 2,664 shares of our common stock to two of our non-employee directors in accordance with the Director
Plan. 
 


37
 

 
Service
Providers 
 
In
August 2023, we issued 1,429 shares of our common stock to a service provider. In March 2023, we issued 10,000 shares of our common stock
to a service provider. In March 2023, we issued 478 shares of our common stock to a service provider. In February 2023, we issued 438
shares of our common stock to a service provider. In May 2022, we issued 348 shares of our common stock to a service provider.
 
2022
Placement
 
In
May 2022, we issued warrants in a private placement to purchase an aggregate of 1,438,202 shares of common stock at an exercise price
of $6.60 per share. The warrants were exercisable six months from the date of issuance and have a five-year term from the date the warrants
become exercisable.
 
 
ITEM
6. RESERVED
 
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The
following discussion of our financial condition and results of operations should be read in conjunction with the financial statements
and related notes included in this Annual Report on Form 10-K, or the Report. Management’s Discussion and Analysis of Financial
Condition and Results of Operations may contain statements that are forward-looking. These statements are based on current expectations
and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words
such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,”
“could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ
materially because of the factors discussed in Part I, Item 1A, These risks and uncertainties may cause actual results to differ
materially from those discussed in the forward-looking statements.
 
Our
fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Report, refers to the fiscal year ended March
31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ending March 31, 2024). Unless the context requires
otherwise, references to “we,” “us,” “our,” and the “Company” refer to Modular Medical,
Inc. and its consolidated subsidiary.
 
Company
Overview
 
We
are a pre-revenue medical device company focused on the design, development and commercialization of innovative insulin pumps using modernized
technology to increase pump adoption in the diabetes marketplace. Through the creation of a novel two-part patch pump, our initial product,
the MODD1, we seek to fundamentally alter the trade-offs between cost and complexity and access to the higher standards of care that
presently-available insulin pumps provide. By simplifying and streamlining the user experience from introduction, prescription, reimbursement,
training and day-to-day use, we seek to expand the wearable insulin delivery device market beyond the highly motivated “super users”
and expand the category into the mass market. The product seeks to serve both the type 1 and the rapidly growing, especially in terms
of device adoption, type 2 diabetes markets. In January 2024, we submitted a 510(k) premarket notification to the United States Food
and Drug Administration (“FDA”) for our MODD1 insulin pump. In March 2024, we received comments from the FDA, and we are
in the process of responding to those comments.
 
In February 2024, we completed a firm commitment
underwritten offering and issued and sold to the underwriter 9,090,910 shares of our common stock at a price of $1.10 per share (the 2024
Offering). We received aggregate proceeds of approximately $10,000,000 before deducting underwriting discounts and commissions and other
offering expenses. We also granted the underwriter a 30-day option to purchase up to an additional 1,321,989 shares of common stock to
cover over allotments, if any. In March 2024, the underwriter exercised this option in full and purchased the additional securities for
additional aggregate proceeds to us of approximately $1,454,000, before deducting underwriting discounts and commissions and other offering
expenses.
  
Historically,
we have financed our operations principally through private placements and public offerings of our common stock and sales of convertible
promissory notes. Based on our current operating plan, substantial doubt about our ability to continue as a going concern for a period
of at least one year from the date that the financial statements included in Item 8 of this Report are issued exists. Our ability to
continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities, to support
our future operations. If we are unable to secure additional capital, we will be required to curtail our research and development initiatives
and take additional measures to reduce costs. We have provided additional disclosure in Note 1 to the consolidated financial statements
in Item 1 of this Report and under Liquidity below.
 


38
 

 
Economic Disruptions
 
The
global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency
by the U.S. government in March 2020. This negatively affected the U.S. and global economy, disrupted global supply chains, significantly
restricted travel and transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant
disruption of the financial markets. While the U.S. national emergency expired in May 2023 and substantially all closures and “shelter-in-place”
orders have ended, there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance in
the future, as the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease
spread are uncertain, out of our control, and cannot be predicted.
 
Wars
and acts of terrorism have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively
impacted the global economy. Since mid-2022, at times, the U.S. Federal Reserve has addressed elevated inflation by increasing interest
rates, as inflation remains elevated. While we were recently able to access the capital markets, in the future, we may be unable to access
the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing
stockholders and to our business.
 
For
additional information on risks that could impact our future results, please refer to “Risk Factors” in Part I, Item 1A of
this Report.
 
Results
of Operations
 
The
following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in
this Report.
 
Research
and Development
 


  
Years ended March 31,  
Year-over-Year Change 

  
2024  
2023  
2024 to 2023 

Research and development 
$12,880  
$9,062  
$3,818  
 42.1%

  
Our research and development, or R&D, expenses
include personnel, consulting, testing, materials and supplies, depreciation and amortization and other operational costs associated with
the pre-FDA clearance production of our insulin pump product. We expense R&D costs as they are incurred.
 
R&D expenses increased in fiscal 2024 compared
with fiscal 2023 primarily due to increases in engineering and operations personnel costs of $1.6 million, consulting costs of $0.8 million,
stock-based compensation expenses of $0.5 million and materials, supplies expenditures of $0.5 million and depreciation and amortization
of $0.4 million. The increase in personnel costs was attributable to increased average headcount year over year, salary increases effected
during fiscal 2024, payment of a bonus implemented in fiscal 2024 related to our 510(k) submission and higher payroll taxes. Our R&D
employee headcount increased to 36 at March 31, 2024 from 34 at March 31, 2023. The increase in consulting costs was primarily driven
by the utilization of consultants and outside testing and other firms in support of our FDA submission in January 2024. R&D expenses
included stock-based compensation expenses of approximately $1.9 million and $1.4 million for fiscal 2024 and fiscal 2023, respectively.
The increase in stock-based compensation costs was primarily attributable to the granting of stock options under our bonus program for
our FDA submission; these options were granted in October 2023 and expensed over an expected term of four months. We expect R&D expenses
will increase in fiscal 2025, as we continue to engage third parties to support our responses to the FDA on our MODD1 510(k) submission,
hire additional engineering, quality assurance, and operations personnel, bring-up our manufacturing process at our medical device contract
manufacturer and commence the commercialization of our product in late fiscal 2025.

 

39
 

 
General
and Administrative
 



  
Year ended March 31,  
Year-over-Year Change 

  
2024  
2023  
2024 to 2023 

General and administrative 
$4,649  
$4,816  
$(167) 
 (3.5)%

  
General and administrative, or G&A, expenses
consist primarily of personnel and related overhead costs for marketing, finance, human resources, facilities and general management.
 
G&A expenses decreased in fiscal 2024 compared with fiscal 2023
primarily as a result of reductions in stock-based compensation expense of $0.5 million, consulting fees of $0.4 million and reduced personnel
costs of $0.2 million. The decreases were partially offset by increased professional services expenses of $0.4 million, which was primarily
attributable to higher investor relations and financing-related costs, facilities-related expenses of $0.3 million due to our move to
a larger facility in the fourth quarter of fiscal 2023, marketing expense of $0.2 million for a participant study for our product and
costs incurred for initial trade show activities. G&A expenses included stock-based compensation expenses of approximately $0.8 million
and $1.3 million for fiscal 2024 and fiscal 2023, respectively. We expect G&A expenses to increase in fiscal 2025, as we expect to
increase headcount, as we expand our organization and implement systems to support our anticipated growth and prepare for the commercialization
of our product in late fiscal 2025.
 
Liquidity
and Capital Resources; Changes in Financial Condition
 
Going
Concern
 
As a development-stage enterprise, we do not
currently have revenues to generate cash flows to cover operating expenses. Since our inception, we have incurred operating losses and
negative cash flows in each year due to costs incurred in connection with R&D activities and G&A expenses associated with our
operations. For the years ended March 31, 2024 and 2023, we incurred net losses of approximately $17.5 million and $13.9 million, respectively.
At March 31, 2024, we had a cash balance of $9.2 million and an accumulated deficit of approximately $66 million. When considered with
our current operating plan, these conditions raise substantial doubt about our ability to continue as a going concern for a period of
at least one year from the date that the financial statements included in Item 8 of this Report are issued. Our financial statements
do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue
as a going concern. Our operating needs include the planned costs to operate our business, including amounts required to fund continued
research and development activities, working capital and capital expenditures. Our ability to continue as a going concern depends on
our ability to raise additional capital, through the sale of equity or debt securities to support our future operations. Recently, during
the three months ended March 31 2024, we completed the 2024 Offering for net proceeds of approximately $10.3 million. On November 22,
2023, we entered into a Sales Agreement (the “ATM Agreement”) with Leerink Partners LLC (“Leerink”) under which
we may offer and sell, from time to time at our sole discretion, shares of our common stock, for aggregate gross proceeds of up to $6.5
million (subject to availability on our shelf registration statement) through an “at the market offering” program under which
Leerink will act as sales agent or principal. In January 2024, we sold 153,879 shares of common stock for net proceeds of approximately
$0.3 million under the ATM Agreement. We suspended sales under the ATM Agreement due to the 2024 Offering, and we may resume sales under
the ATM during fiscal 2025. In addition, from December 2023 to April 2024, we received a total of approximately $0.9 million of proceeds
from the exercise of common stock purchase warrants issued in a public offering we completed in May 2023. Our future capital requirements
and the adequacy of our available funds will depend on many factors, including, without limitation, our ability to successfully commercialize
our product, competing technological and market developments, and the need to enter into collaborations with other companies or acquire
other companies or technologies to enhance or complement our product offerings. If we are unable to secure additional capital timely,
we may be required to curtail R&D initiatives, reduce headcount and take additional measures to reduce costs in order to conserve
our cash. 
Purchase
Obligations 
 
Our primary purchase obligations include purchase
orders for machinery and equipment. At March 31, 2024, we had outstanding purchase orders for machinery and equipment and related expenditures
of approximately $1.1 million. In December 2023, we signed a device integration agreement with a provider of connected-care and remote
monitoring diabetes technology solutions. As of March 31, 2024, we had a remaining obligation under the device integration agreement of
approximately $400,000 over three years for technology license fees.

 


40
 

 
Liquidity
 
In
fiscal 2024, we used approximately $14.0 million in operating activities, which primarily resulted from our net loss of approximately
$17.5 million less changes to operating assets and liabilities of approximately $0.4 million, and as adjusted for non-cash charges and
gains, which included approximately $2.7 million of stock-based compensation expenses, depreciation and amortization expenses of approximately
$0.4 million, and other immaterial adjustments. The changes in operating assets and liabilities primarily related to the timing of payments
to vendors. In fiscal 2023, we used approximately $11.0 million in operating activities, which primarily resulted from our net loss of
approximately $13.9 million plus changes to operating assets and liabilities of approximately $0.2 million, as adjusted for non-cash
charges and gains, which included stock-based compensation expenses of approximately $2.7 million, approximately $0.2 million for issuance
of shares of our common stock in exchange for services, depreciation and amortization expense of approximately $0.2 million and other
immaterial adjustments. The changes in operating assets and liabilities primarily related to the timing of payments to vendors.
 
For
fiscal 2024 and fiscal 2023, cash used in investing activities of approximately $1.7 million and $1.6 million, respectively, was for
the purchase of property and equipment.
 
Cash
provided by financing activities for fiscal 2024 totaled approximately $21.1 million and was primarily attributable to proceeds of approximately
$20.1 million from the sale of shares of common stock in a registered direct offering and issuance of warrants to purchase common stock
in private placements that closed in May 2023 and February 2024, net of underwriter fees and issuance
costs, proceeds of approximately $0.7 million for the exercise of common stock purchase warrants and proceeds of approximately $0.3 from
the sale of shares under the ATM agreement. Cash provided by financing activities for fiscal 2023 totaled approximately $7.4 million
and was attributable to approximately $7.4 million of net proceeds from a registered direct offering of our common stock and common stock
purchase warrants in May 2022, net of placement agent fees and issuance costs.
 
Critical
Accounting Policies and Estimates
 
Our
consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America
(GAAP). Note 1 to the consolidated financial statements in Item 8 of this Report describes the significant accounting policies and methods
used in the preparation of our consolidated financial statements. We have identified the accounting policies below as some of the more
critical to our business and the understanding of our results of operations. These policies may involve estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. Although we believe our judgments and estimates are appropriate,
actual future results may differ from our estimates, and if different assumptions or conditions were to prevail, the results could be
materially different from our reported results.
 
Use
of estimates
 
The
preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to accruals, stock-based compensation
and income taxes. Actual results could materially differ from those estimates.
 
Stock-based
compensation
 
We
periodically issue stock options, restricted stock units and stock awards to employees and non-employees. We account for such awards
based on Financial Accounting Standards Board Accounting Standards Codification (ASC) 718, whereby the value of the award is measured
on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period, usually the vesting
period. With respect to performance-based awards, we assess the probability of achieving the requisite performance criteria before recognizing
compensation expense. We estimate the fair value of stock options on the date of grant using the Black-Scholes-Merton Option Pricing
(Black Scholes) model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options,
and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes model. The assumptions used
in the Black-Scholes model could materially affect compensation expense recorded in future periods.
 
Income
taxes
 
We
determine deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of our assets
and liabilities using tax rates in effect for the year in which we expect the differences to affect taxable income. A valuation allowance
is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will
not be realized. Based on the available information and other factors, management believes it is more likely than not that our federal
and state net deferred tax assets will not be fully realized, and we have recorded a full valuation allowance.
 


41
 

 
We
account for uncertain tax positions in accordance with ASC Topic 740, Income Taxes. When tax returns are filed, it is likely that
some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the
merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized
in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more
likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if
any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition
threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with
the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with
any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized
tax benefits is classified as interest expense and penalties are classified in general and administrative expenses in the consolidated
statements of operations.
 
Leases
 
We
account for our leases under ASC 842, Leases (ASC 842), and related ASUs, which provide supplementary guidance and clarifications.
Under ASC 842, all significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (ROU)
assets and lease liabilities are recognized at the commencement date. A ROU asset and corresponding lease liability are not recorded
for leases with an initial term of 12 months or less (short-term leases), and we recognize lease expense for these leases as incurred
over the lease term.
 
ROU
assets represent our right to use an underlying asset during the reasonably certain lease terms, and lease liabilities represent our
obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it
is reasonably certain that we will exercise that option. Operating lease ROU assets and liabilities are recognized at the lease commencement
date based on the present value of lease payments over the lease term. We use our incremental borrowing rate, based on the information
available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease
payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line
basis over the lease term.
 
Off-Balance
Sheet Arrangements
 
We
do not maintain any off-balance sheet arrangements or obligations that are reasonably likely to have a material current or future effect
on our financial condition, results of operations, liquidity or capital resources.
 
Contractual
Obligations
 
As
a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide the information requested
by paragraph (a)(5) of this Item.
 
Recent
Accounting Pronouncements
 
See
Note 1 to the consolidated financial statements in Item 8 of this Report for a full description of relevant recent accounting pronouncements.
 
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not
applicable.
 


42
 

 
ITEM
8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 


Report
    of Independent Registered Accounting Firm – Farber Hass Hurley LLP
F-2

Consolidated Balance
    Sheets
F-4

Consolidated Statements
    of Operations
F-5

Consolidated Statements
    of Stockholders’ Equity 
F-6

Consolidated Statements
    of Cash Flows
F-7

Notes to Consolidated
    Financial Statements
F-8

 


F-1
 

 
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - OPEN
 
To the Audit
Committee and
Stockholders of Modular Medical, Inc.
 
Opinion
on the Financial Statements
 
We
have audited the accompanying consolidated balance sheets of Modular Medical, Inc. (the “Company”) as of March 31, 2024 and
2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and
the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and
the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted
in the United States of America.
 
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
 
The
accompanying consolidated financial statements have been prepared to assume the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has incurred losses from operations and needs to raise additional funds
to meet its obligations and sustain its future operations until profitability is achieved. These circumstances raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Basis
for Opinion
 
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
 
Critical
Audit Matters
 
The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
 


F-2
 

 
Going
Concern
 
As
described further in Note 1, the Company has incurred losses since inception, and expects to continue to incur operating losses for the
foreseeable future and incur cash outflows from operations as it continues to invest in the development and subsequent commercialization
of its product. The Company expects that its research and development and general and administrative expenses will continue to increase,
and, as a result, the Company will need to generate significant product revenues to achieve profitability. These circumstances raise
substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated
financial statements are issued.
 
We
identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter due
to the inherent complexities and uncertainties related to the Company’s projections of operations.
 
The
primary procedures we performed to address this critical audit matter included:
 

-We
                                            evaluated the reasonableness of key assumptions underlying management’s conclusion.

 

-We
                                            evaluated that the disclosures included in the Form 10-K were complete and accurate and in
                                            accordance with accounting principles generally accepted in the United States of America.

 

-We
                                            evaluated the impact of the Company’s existing financing arrangements and future capital
                                            needs over the next 12 months on its ability to continue as a going concern.

 
Stock-Based
Compensation
 
As
discussed in Note 5, during the year ended March 31, 2024, the Company granted options to purchase shares of its common stock to employees,
directors and consultants. Management is required to analyze the fair value of each option granted and amortize it over its vesting period.
 
We identified the valuation of stock-based compensation as a critical
audit matter due to the significant judgments made by management when developing underlying assumptions regarding the fair value of the
options. 
 
The
primary procedures we performed to address this critical audit matter included:
 

-We
                                            gained an understanding of Company’s processes and controls in place for determining
                                            the fair value of each granted option.

 

-We evaluated the option price model management selected to determine
the fair value, and analyzed the underlying data and assumptions used in the calculations.

 

-We
                                            also recalculated the fair value of each option granted.

 
/s/
Farber Hass Hurley LLP
PCAOB
Firm ID 223
We
have served as the Company’s auditor since 2018.
 
Chatsworth,
California
June 21, 2024
 


F-3
 

 
Modular
Medical, Inc.
Consolidated
Balance Sheets
(In
thousands, except par value)
 


  
March
    31, 

  
2024  
2023 

ASSETS 
   
  

CURRENT ASSETS 
   
  

Cash and
    cash equivalents 
$9,232  
$3,799 

Prepaid expenses and
    other 
 465  
 147 

Security deposit 
 —  
 100 

TOTAL
    CURRENT ASSETS 
 9,697  
 4,046 

Property and equipment,
    net 
 2,975  
 1,721 

Right of use assets,
    net 
 1,135  
 1,478 

TOTAL
    NON-CURRENT ASSETS 
 4,110  
 3,199 

TOTAL
    ASSETS 
$13,807  
$7,245 

  
    
   

LIABILITIES AND STOCKHOLDERS’
    EQUITY 
    
   

  
    
   

CURRENT LIABILITIES 
    
   

Accounts payable 
$802  
$285 

Accrued expenses 
 280  
 339 

Short-term lease liabilities 
 373  
 355 

TOTAL
    CURRENT LIABILITIES 
 1,455  
 979 

Long-term lease liabilities 
 817  
 1,190 

TOTAL
    LIABILITIES 
 2,272  
 2,169 

  
    
   

Commitments
    and Contingencies (Note 8) 
    
   

  
    
   

STOCKHOLDERS’ EQUITY 
    
   

Preferred Stock, $0.001 par value, 5,000 shares authorized, none issued and outstanding 
 —  
 — 

Common Stock, $0.001 par value, 100,000 and 50,000 shares authorized
as of March 31, 2024 and 2023, respectively; 32,464 and 10,949 shares issued and outstanding as of March 31, 2024 and 2023, respectively 
 32  
 11 

Additional paid-in capital 
 77,432  
 53,524 

Accumulated deficit 
 (65,929) 
 (48,459)

TOTAL
    STOCKHOLDERS’ EQUITY 
 11,535  
 5,076 

TOTAL
    LIABILITIES AND STOCKHOLDERS’ EQUITY 
$13,807  
$7,245 

 
The
accompanying notes are an integral part of these audited consolidated financial statements.
 


F-4
 

 
Modular
Medical, Inc.
Consolidated
Statements of Operations
(In
thousands, except per-share data)
 


  
Year
    Ended March 31, 

  
2024  
2023 

Operating expenses 
   
  

Research
    and development 
$12,880  
$9,062 

General and administrative 
 4,649  
 4,816 

Total
    operating expenses 
 17,529  
 13,878 

Loss from operations 
 (17,529) 
 (13,878)

Other income 
 61  
 1 

  
    
   

Loss before income taxes 
 (17,468) 
 (13,877)

Provision for income taxes 
 2  
 2 

  
    
   

Net
    loss 
$(17,470) 
$(13,879)

Net loss per share 
    
   

Basic and diluted 
$(0.78) 
$(1.15)

Shares used in computing net loss per share 
    
   

Basic and diluted 
 22,377  
 12,103 

 
The
accompanying notes are an integral part of these audited consolidated financial statements.
 


F-5
 

 
Modular
Medical, Inc.
Consolidated
Statements of Stockholders’ Equity
(In
thousands)
 


  
   
   
Additional  
   
  

  
Common
    Stock  
Paid-In  
Accumulated  
Stockholders’ 

  
Shares  
Amount  
Capital  
Deficit  
Equity 

Balance as of March 31, 2022 
 10,462  
$11  
$43,406  
$(34,580) 
$8,837 

Issuance
    of common stock in registered direct offering, net of fees and issuance costs 
 449  
 —  
 7,372  
 —  
 7,372 

Shares issued for services 
 11  
 —  
 22  
 —  
 22 

Issuances under equity incentive plan 
 27  
 —  
 86  
 —  
 86 

Stock-based compensation 
 —  
 —  
 2,638  
 —  
 2,638 

Net loss 
 —  
 —  
 —  
 (13,879) 
 (13,879)

Balance as of March 31, 2023 
 10,949  
$11  
$53,524  
$(48,459) 
$5,076 

Issuance
    of common stock in public offerings, net of fees and issuance costs 
 20,552  
 20  
 20,045  
 —  
 20,065 

At-the-market sales of stock, net 
 154  
 —  
 278  
 —  
 278 

Exercise of warrants 
 719  
 1  
 883  
 —  
 884 

Shares issued for services 
 2  
 —  
 1  
 —  
 1 

Issuances under equity incentive plan 
 88  
 —  
 37  
 —  
 37 

Stock-based compensation 
 —  
 —  
 2,664  
 —  
 2,664 

Net loss 
 —  
 —  
 —  
 (17,470) 
 (17,470)

Balance as of March 31, 2024 
 32,464  
$32  
$77,432  
$(65,929) 
$11,535 

 
The
accompanying notes are an integral part of these audited consolidated financial statements.
 


F-6
 

 
Modular
Medical, Inc.
Consolidated
Statements of Cash Flows
(In
thousands)
 


  
Year
    ended March 31, 

  
2024  
2023 

Cash Flows from operating activities 
   
  

Net loss 
$(17,470) 
$(13,879)

Adjustments to reconcile net loss to net cash
    used in operating activities: 
    
   

Stock-based compensation
    expense 
 2,701  
 2,724 

Loss on asset disposal 
 21  
 — 

Depreciation and amortization 
 426  
 152 

Shares issued for services 
 19  
 203 

Changes in assets and liabilities: 
    
   

Prepaid expenses and
    other assets 
 (94) 
 (14)

Lease right-of-use assets 
 342  
 203 

Accounts payable and
    accrued expenses 
 458  
 (200)

Change in lease liabilities 
 (355) 
 (200)

Net cash used in operating
    activities 
 (13,952) 
 (11,011)

  
    
   

Cash flows from investing
    activities 
    
   

Purchases of property
    and equipment 
 (1,700) 
 (1,638)

Net cash used in investing
    activities 
 (1,700) 
 (1,638)

  
    
   

Cash flows from financing
    activities 
    
   

Proceeds from at-the-market
    sales of common stock, net 
 278  
 — 

Proceeds from exercise
    of common stock warrants 
 742  
 — 

Proceeds from public
    and registered direct offerings, net 
 20,065  
 7,372 

Net cash provided by financing
    activities 
 21,085  
 7,372 

  
    
   

Net increase (decrease) in cash and cash equivalents 
 5,433  
 (5,277)

Cash and cash equivalents, at beginning of
    year 
 3,799  
 9,076 

  
    
   

Cash and cash equivalents,
    at end of year 
$9,232  
$3,799 

Supplemental disclosure: 
    
   

Noncash investing and financing activities: 
    
   

Right-of-use asset obtained
    in exchange for lease liability 
$—  
$1,561 

Receivable from transfer
    agent for warrant exercise proceeds 
$142  
 — 

Cash paid for: 
    
   

Income taxes 
$2  
$2 

 
The
accompanying notes are an integral part of these audited consolidated financial statements.
 


F-7
 

 
MODULAR
MEDICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1
– THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Modular
Medical, Inc. (the Company) was incorporated in Nevada in October 1998 under the name Bear Lake Recreation, Inc. The Company had no material
business operations from 2002 until approximately 2017 when it acquired all of the issued and outstanding shares of Quasuras, Inc., a
Delaware corporation (Quasuras). As the major shareholder of Quasuras retained control of both the Company and Quasuras, the share exchange
was accounted for as a reverse merger. As such, the Company recognized the assets and liabilities of Quasuras, acquired in the merger,
at their historical carrying amounts. Prior to the acquisition of Quasuras and, since at least 2002, the Company was a shell company,
as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act). In June 2017, the Company changed
its name from Bear Lake Recreation, Inc. to Modular Medical, Inc.
 
The
Company is a pre-revenue, medical device company focused on the design, development and eventual commercialization of innovative insulin
pumps using modernized technology to increase pump adoption in the diabetes marketplace. Through the creation of an innovative two-part
patch pump, its initial product, the MODD1, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access
to the higher standards of care requiring considerable motivation that presently available insulin pumps provide. By simplifying and
streamlining the user experience from introduction, prescription, reimbursement, training and day-to-day use, the Company seeks to expand
the wearable insulin delivery device market beyond the highly motivated “super users” and expand the category into the mass
market. The product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets.
In January 2024, the Company submitted a 510(k) premarket notification to the United States Food and Drug Administration (FDA) for the
MODD1. In March 2024, the Company received comments from the FDA on its submission, and the Company is in the process of responding to
those comments.
 
Liquidity
and Going Concern
 
The
Company expects to continue to incur operating losses for the foreseeable future and incur cash outflows from operations as it continues
to invest in the development and subsequent commercialization of its product. The Company expects that its research and development and
general and administrative expenses will continue to increase, and, as a result, it will eventually need to generate significant revenue
to achieve profitability. The Company’s expected operating losses and cash burn raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that these financial statements are issued. In addition, the Company’s
independent registered public accounting firm, in its report on these consolidated financial statements for the year ended March 31,
2024, expressed substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements
do not include any adjustments that might result from this uncertainty. Implementation of the Company’s plans and its ability to
continue as a going concern will depend upon the Company’s ability to raise additional capital, through the sale of additional
equity or debt securities, to support its future operations. There can be no assurance that such additional capital, whether in the form
of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions
acceptable to the Company. In, May 2023 and February 2024, the Company completed public offerings of its common stock and warrants.
 
The
Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital
and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many
factors, including the Company’s ability to successfully commercialize its product, competing technological and market developments,
and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its
product offering. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives
and take additional measures to reduce costs in order to conserve its cash.
 
Basis
of Presentation
 
The
consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States of America. The Company’s fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in
these notes to the consolidated financial statements refers to the fiscal year ended March 31 of the calendar year indicated (for example,
fiscal 2024 refers to the fiscal year ending March 31, 2024). The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Quasuras. All significant intercompany transactions and balances have been eliminated in consolidation. 



F-8
 

 
Use of
Estimates
 
The
preparation of the accompanying consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the
reporting period. Estimates may include those pertaining to accruals, stock-based compensation and income taxes. Actual results could
differ from those estimates.
 
Reportable
Segment
 
The Company
operates in one business segment and uses one measurement of profitability for its business.
 
Research
and Development
 
The Company
expenses research and development expenditures as incurred.
 
General
and Administrative
 
General and administrative expenses consist primarily of payroll and
benefit costs, rent, stock-based compensation, legal and accounting fees, and facility and other administrative expenses.
 
Concentration
of Credit Risk
 
Financial instruments that potentially subject
the Company to concentration of credit risk consist primarily of cash held in demand deposit accounts. The Company maintains its cash
at high credit quality financial institutions within the United States, which are insured by the Federal Deposit Insurance Corporation
(FDIC) up to limits of approximately $250,000. No reserve has been made in the financial statements for any possible loss due to financial
institution failure. 
Risks
and Uncertainties
 
The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with
financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.
 
Economic
Disruptions
 
The
global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency
by the U.S. government in March 2020. This negatively affected the U.S. and global economy, disrupted global supply chains, significantly
restricted travel and transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant
disruption of the financial markets. While the U.S. national emergency expired in May 2023 and substantially all closures and “shelter-in-place”
orders have ended, there can be no assurance that the COVID-19 pandemic will not impact the Company’s operational and financial
performance in the future, as the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies
to prevent disease spread are uncertain, out of our control, and cannot be predicted.
 
Wars
and acts of terrorism have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively
impacted the global economy. Since mid-2022, at times, the U.S. Federal Reserve has addressed elevated inflation by increasing interest
rates, as inflation remains elevated. While the Company was recently able to access the capital markets, in the future, the Company may
be unable to access the capital markets, and additional capital may only be available to the Company on terms that could be significantly
detrimental to its existing stockholders and to its business. 



F-9
 

 
Cash and
Cash Equivalents
 
Cash and cash equivalents include cash held in
demand deposit and money market accounts, certificates of deposit and all highly liquid debt instruments with original maturities of
three months or less. 
Property
and Equipment
 
Property and equipment are recorded at historical
cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five
years. Depreciation is recorded in operating expenses in the consolidated statements of operations. Leasehold improvements and assets
acquired through finance leases are amortized over the shorter of their estimated useful life or the lease term, and amortization is
recorded in operating expenses in the consolidated statements of operations. Construction-in-process includes machinery and equipment
and is stated at cost and not depreciated. Depreciation on construction-in-process commences when the assets are ready for their intended
use and placed into service. 
Fair Value
of Financial Instruments
 
The
Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels:
 

●Level
                                            1 inputs to the valuation methodology are quoted prices for identical assets or liabilities
                                            in active markets.

 

●Level
                                            2 inputs to the valuation methodology include quoted prices for similar assets and liabilities
                                            in active markets, and inputs that are observable for the asset or liability, either directly
                                            or indirectly, for substantially the full term of the financial instrument.

 

●Level
                                            3 inputs to the valuation methodology are unobservable and significant to the fair value
                                            measurement.

 
Due
to their short-term nature, the carrying values of cash equivalents, accounts payable and accrued expenses, approximate fair value.
  
Leases
 
The
Company’s right-of-use assets consist of leased assets recognized in accordance with Financial Accounting Standards Board (FASB)
ASC No. 842, Leases, which requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease
contracts. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and the lease liability
represents the Company’s obligation to make lease payments arising from the lease, both of which are recognized based on the present
value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less
at inception are not recorded on the consolidated balance sheets and are expensed on a straight-line basis over the lease term in the
consolidated statement of operations and comprehensive loss. The Company determines the lease term by agreement with the lessor. In cases
where the lease does not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on
the information available at commencement date in determining the present value of future payments.
 
Stock-Based
Compensation
 
The
Company periodically issues stock options, restricted stock units and stock awards to employees and non-employees. We account for such
awards based on Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, whereby the value of the award
is measured on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period, usually
the vesting period. With respect to performance-based awards, the Company assesses the probability of achieving the requisite performance
criteria before recognizing compensation expense. The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton
Option Pricing (Black Scholes) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected
life of the options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes model.
The assumptions used in the Black-Scholes model could materially affect compensation expense recorded in future periods. 



F-10
 

 
Per-Share
Amounts
 
Basic
net loss per share is computed by dividing loss for the period by the weighted-average number of shares of common stock outstanding (WASO)
during the period. In addition, the Company includes the number of shares of common stock issuable under pre-funded warrants as outstanding
for purposes of the WASO calculation. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during
the period. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options
and exercise of warrants.
 
Prior
to April 1, 2023, the Company excluded pre-funded warrants from the computation of WASO. The pre-funded warrants are now included in
the computation of WASO. Prior period amounts have been conformed to the current-period presentation. The impact of the change reduced
the previously reported loss per share by $0.13 and increased WASO by approximately 1,223,000 shares for the year ended March 31, 2023.
The reclassification had no impact on the Company’s net loss or cash flows for the year ended March 31, 2023.
 
The
following table sets forth securities outstanding which were excluded from the computation of diluted net loss per share as their inclusion
would be anti-dilutive (in thousands):
 


  
March
    31, 

  
2024  
2023 

Options to purchase common stock 
 3,689  
 2,481 

Unvested restricted stock units 
 187  
 — 

Common stock purchase warrants 
 11,173  
 6,217 

Total 
 15,049  
 8,698 

 
Reclassifications
 
Certain
prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect
on the reported results of operations or cash flows.
 
Income
Taxes
 
The
Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the
Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect
taxable income. A valuation allowance is established for any deferred tax assets for which it is more likely than not that all or a portion
of the deferred tax assets will not be realized. Based on the available information and other factors, management believes it is more
likely than not that its federal and state net deferred tax assets will not be fully realized, and the Company has recorded a full valuation
allowance.
 
The
Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740, Income Taxes. When tax returns are filed,
it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position
is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes,
if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition
threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with
the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with
any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized
tax benefits is classified as interest expense and penalties are classified in general and administrative expenses in the consolidated
statements of operations.
 
The
Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. The Company’s historical
net operating loss and credit carryforwards may be adjusted by the federal and state tax authorities until the statute closes on the
year in which such tax attributes are utilized.
 
Comprehensive
Loss
 
Comprehensive
loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive
loss may include certain changes in equity that are excluded from net loss. For the years ended March 31, 2024 and 2023, the Company’s
comprehensive loss was the same as its net loss. 



F-11
 

 
Recently
Issued Accounting Pronouncements 
 
In
November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,
which requires disclosure of incremental segment information on an annual and interim basis. ASU No. 2023-07 is effective for fiscal
years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and it requires retrospective
application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this ASU
will have on the presentation of its consolidated financial statements.
 
In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which
expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S.
and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently
evaluating the impact that this ASU will have on the presentation of its consolidated financial statements.
 
NOTE
2 – CONSOLIDATED BALANCE SHEET DETAIL
 



  
March 31, 

  
2024  
2023 

  
(in thousands) 

Prepaid and other current assets: 
    
   

Prepaid expenses 
$318  
$142 

Receivable from transfer agent for warrant exercise proceeds 
 142  
 — 

Other receivables 
 5  
 5 

  
$465  
$147 

  


  
March
    31, 

  
2024  
2023 

 
(in thousands) 

Property and equipment, net: 
  

Machinery and equipment 
$3,209  
$820 

Computer equipment and software 
 66  
 66 

Construction-in-process 
 283  
 1,003 

Leasehold improvements 
 33  
 25 

Office equipment 
 63  
 63 

  
 3,654  
 1,977 

Less: accumulated depreciation
    and amortization 
 (679) 
 (256)

 
$2,975  
$1,721 

 


  
March
    31, 

  
2024  
2023 

  
(in thousands) 

Accrued Expenses 
   
  

Accrued wages 
$243  
$267 

Other 
 37  
 72 

  
$280  
$339 

 
NOTE 3
– LEASES
 
W.
Bernardo Drive, San Diego, CA
 
The
39-month lease term expired on June 30, 2023, and, subsequent to expiration, the landlord refunded the Company’s security deposit.
 
Thornmint
Road, San Diego, CA
 
The
48-month lease term commenced February 1, 2023, and the lease provides for an initial base monthly rent of $36,000 with annual rent increases
of approximately 4%. In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and other certain
operating costs. A discount rate of 8%, which approximated the Company’s incremental borrowing rate, was used to measure the lease
asset and liability. The Company obtained a right-of-use asset of approximately $1,560,000 in exchange for its obligations under the
operating lease. 



F-12
 

 
Future minimum
payments under the facility operating lease, as of March 31, 2024, are listed in the table below (in thousands).
 


Fiscal year
    ending March 31, 
  

2025 
 452 

2026 
 470 

2027 
 405 

Total future lease payments 
 1,327 

Less: Imputed interest 
 (137)

Present value of lease liabilities 
$1,190 

 
Cash
paid for amounts included in the measurement of lease liabilities was approximately $476,000 and $230,000 for the years ended March 31,
2024 and 2023, respectively. Rent expense was approximately $449,000 and $237,000 for the years ended March 31, 2024 and 2023, respectively.
  
NOTE
4 – STOCKHOLDERS’ EQUITY
 
Increase
in Authorized Shares
 
In
February 2024, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation (the Amendment)
to increase the number of authorized shares of common stock from 50,000,000 shares, to 100,000,000 shares. The Amendment was filed with
the state of Nevada and became effective on February 15, 2024.
 
February
2024 Public Offering 
 

On February 15, 2024, the Company entered into
an underwriting agreement (the 2024 Underwriting Agreement) with Titan Partners Group LLC, a division of American Capital Partners, LLC
(Titan), with respect to the issuance and sale 9,090,910 shares of its common stock at a price of $1.10 per share in a firm commitment
underwritten offering (the 2024 Offering) by the Company. Upon the closing of the 2024 Offering, the Company received aggregate proceeds
of approximately $10,000,000, before deducting underwiring discounts and commissions and other offering expenses.
 
Pursuant to the 2024 Underwriting Agreement,
the Company granted Titan a 30-day option to purchase up to an additional 1,321,989 shares of common stock to cover over allotments,
if any. On March 13, 2024, Titan exercised this option in full and purchased the additional securities for aggregate proceeds to the
Company of approximately $1,454,000 before deducting underwriting discounts and commissions and other offering expenses.
 
Titan
was paid a cash fee of 7.0% of the aggregate gross proceeds of the 2024 Offering (including the over-allotment option) and reimbursed
certain out-of-pocket expenses of approximately $75,000.
 
ATM Offering
 
On
November 22, 2023, the Company entered into a Sales Agreement (the ATM Agreement) with Leerink Partners LLC (Leerink) under which the
Company may offer and sell, from time to time at its sole discretion, shares of its common stock, for aggregate gross proceeds of up
to $6,500,000 through an “at the market offering” program under which Leerink will act as sales agent or principal. The ATM
Agreement provides that Leerink will be entitled to compensation for its services equal to 3.0% of the gross proceeds from sales of any
shares of common stock under the ATM Agreement. The Company has no obligation to sell any shares under the ATM Agreement and may, at
any time, suspend solicitation and offers under the ATM Agreement. In January 2024, under the ATM Agreement, the Company sold 153,879
shares of common stock for net proceeds of approximately $278,000.
 
May
2023 Public Offering 
 
On May 15, 2023, the Company entered into an underwriting
agreement (the Underwriting Agreement) with Newbridge Securities Corporation (the Underwriter), with respect to the issuance and sale
in a firm commitment underwritten offering (the 2023 Offering) by the Company of units of its securities. Upon the closing of the 2023
Offering, the Company sold 8,816,900 shares of its common stock and warrants to purchase 4,408,450 shares of its common stock for aggregate
proceeds of approximately $9,390,000, before deducting underwriting discounts and commissions and other offering expenses. The securities
were sold as a unit, with each unit consisting of two shares of common stock of the Company and one warrant (the 2023 Warrants) to purchase
one share of common stock, at a public offering price of $2.13 per unit. The 2023 Warrants were immediately separable and exercisable,
have a per share exercise price of $1.22 and expire five years from the date of issuance.
 


F-13
 

 
Pursuant
to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 1,322,534 shares of
common stock and an additional 661,267 of the 2023 Warrants to cover over-allotments, if any. On May 25, 2023, the Underwriter exercised
this option in full and purchased the additional securities for aggregate gross proceeds to the Company of approximately $1,408,000,
before deducting underwriting discounts and commissions and other offering expenses.
 
The
Underwriter was paid a cash fee of 7.0% of the aggregate gross proceeds of the 2023 Offering (including the over-allotment option) and
reimbursed certain out-of-pocket expenses of approximately $125,000. In addition, pursuant to the Underwriting Agreement, the Company
initially issued to the Underwriter common stock purchase warrants (the UW Warrants) for a total of 709,760 shares. Subsequently, the
UW Warrants were reissued to the Underwriter and its agents for a total of 604,623 shares. The UW warrants were exercisable six months
from the respective issuance dates and have a four-year term and a per share exercise price of $1.32.
 
May 2022
Placement 
 
On
May 2, 2022, the Company entered into a securities purchase agreement (the Purchase Agreement) with an institutional investor, pursuant
to which the Company sold, in a registered direct offering, which closed on May 5, 2022, an aggregate of 449,438 shares (the Shares)
of the Company’s common stock, par value $0.001 per share, at a purchase price per Share of $4.45 and pre-funded warrants (the
Pre-Funded Warrants) to purchase an aggregate of approximately 1,348,000 shares of common stock at a purchase price per Pre-Funded Warrant
of $4.44. The Pre-Funded Warrants will be exercisable immediately on the date of issuance at an exercise price of $0.01 per share and
may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. In a concurrent private placement under the
Purchase Agreement, the Company issued to the Investor warrants (the Private Placement Warrants) to purchase an aggregate of 1,438,202
shares of common stock at an exercise price of $6.60 per share. The Private Placement Warrants were exercisable beginning on the six-month
anniversary of the date of issuance (the Initial Exercise Date) and will expire on the five-year anniversary of the Initial Exercise
Date.
 
Issuances
of Common Stock and Warrants
 
During
the years ended March 31, 2024 and 2023, the Company issued 1,429 and 11,264 shares of common stock to service providers, respectively,
with fair values of approximately $1,400 and $22,000, respectively.
 
As
of March 31, 2024, the Company had the following warrants outstanding (share amounts in thousands):
 
  Type   Number of Shares     Exercise Prices     Expiration Dates    Balance as of March 31, 2023     7,565                    Issuance of common stock warrants     605     $ 1.32       May 2027    Issuance of common stock warrants     5,070     $ 1.22       May 2028    Common stock warrants exercised     (70 )    $ 1.32            Common stock warrants exercised     (649 )    $ 1.22            Balance as of March 31, 2024     12,521                   
 
At
March 31, 2024, the Company had a receivable from its transfer agent for approximately $142,000 for the proceeds from warrants exercised
prior to March 31, 2024. The receivable was recorded in the prepaid and other line in the consolidated balance sheet at March 31, 2024.
 
As
of March 31, 2023, the Company had the following warrants outstanding (share amounts in thousands):
 
  Type  Number of Shares   Exercise Prices   Expiration  Dates  Common stock   1,348   $0.01   —  Common stock   768   $6.00   January - February 2027  Common stock   4,011   $6.60   February 2027  Common stock   1,438   $6.60   November 2027  Total   7,565          
 
NOTE 5
– STOCK-BASED COMPENSATION
 
Amended
2017 Equity Incentive Plan
 
In
October 2017, the Company’s Board approved the 2017 Equity Incentive Plan (the Plan) with 1,000,000 shares of common stock reserved
for issuance. In January 2020 and August 2021, the Board approved increases in the number of shares reserved for issuance under the Plan
by 333,334 and 1,333,334 shares, respectively. In January 2023 and February 2024, the Company’s stockholders approved increases
in the number of shares reserved for issuance under the Plan by an additional 2,000,000 and 3,000,000 shares, respectively. Under the
Plan, eligible employees, directors and consultants may be granted a broad range of awards, including stock options, stock appreciation
rights, restricted stock, performance-based awards and restricted stock units (RSUs). The Plan is administered by the Board or, in the
alternative, a committee designated by the Board. 



F-14
 

 
Stock-Based
Compensation Expense
 
Stock
options granted by the Company generally vest over 36 months and have a 10-year term. As of March 31, 2024, the unamortized compensation
cost related to stock options was approximately $2,035,000 and is expected to be recognized as expense over a weighted-average period
of approximately 1.3 years.
 
In
October 2023, under its Two-Part FDA Submission and Clearance Milestone Bonus Program (the Bonus Program), the Company granted stock
options for 909,533 shares, which are subject to vesting based upon the achievement of certain performance milestones by the
Company and continued service by the optionees. In January 2024, options to purchase 625,326 shares (net of forfeitures), which were
granted under part one of the Bonus Program, vested upon the Company’s submission to the FDA. As of March 31, 2024, the Company
had not commenced expense recognition of 242,307 (net of forfeitures) of the options, which were granted under part two of
the Bonus Program, based on its assessment of the probability of achievement of the applicable performance requirements.
 
During
the year ended March 31, 2024, the Company granted options to purchase 127,500 shares that vested immediately when granted.
 
The
weighted-average grant date fair values of stock options granted during the years ended March 31, 2024 and 2023 was $0.99 and $2.85,
respectively. The following assumptions were used in the fair-value method calculations:
 


 
 
 
Year
    Ended March 31,
 

 
 
 
2024
 
 
 
2023
 

Risk-free interest rates
 
 
3.51% - 4.72%
 
 
 
2.82% - 4.06%
 

Volatility
 
 
83% - 152%
 
 
 
83% - 223%
 

Expected life (years)
 
 
5.0 - 6.2
 
 
 
5.0 – 5.7
 

Dividend yield
 
 
—
 
 
 
—
 

 
The
fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified methods
to establish the fair term of options. The expected volatility is based on the historical volatility of the Company’s stock price.
The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the U.S. Department of the Treasury
as of the grant date for terms equal to the expected terms of the options. A dividend yield of zero was applied because the Company has
never paid dividends and has no intention to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur.
 
The
following table summarizes the activity in the shares available for grant under the Plan during the year ended March 31, 2024:
 


  
   
Options
    Outstanding 

  
Shares Available for
                                            Grant  
Number
    of Shares  
Weighted
     Average Exercise  Price 

Balance at March 31, 2022 
 989,466  
 1,650,705  
$6.58 

Additional shares authorized
    under the Plan 
 2,000,000  
 —  
 — 

Options granted 
 (1,006,074) 
 1,006,074  
 3.15 

Share awards 
 (26,789) 
 —  
 — 

Options cancelled and
    returned to the Plan 
 175,689  
 (175,689) 
 6.48 

Balance at March 31, 2023 
 2,132,292  
 2,481,090  
 5.19 

Additional shares authorized
    under the Plan 
 3,000,000  
 —  
 — 

Options granted 
 (1,448,533) 
 1,448,533  
 0.99 

Share awards 
 (25,390) 
 —  
 — 

RSUs granted 
 (250,000) 
 —  
 — 

Options cancelled and
    returned to the Plan 
 240,282  
 (240,282) 
 3.84 

Balance at March 31, 2024 
 3,648,651  
 3,689,341  
$3.70 

 
No
stock options were exercised during the years ended March 31, 2024 and 2023. During the years ended March 31, 2024 and 2023, the Company
issued 25,390 and 26,789 shares, respectively, to its non-employee directors under the Company’s outside director compensation
plan. For the years ended March 31, 2024 and 2023, the Company recorded stock-based compensation expense for these share awards of approximately
$37,000 and $86,000, respectively. 


F-15
 

 
A
summary of RSU activity under the Plan is presented below.
 



  
Number of Shares  
Weighted Average Grant- Date Fair Value 

Balance at March 31, 2023 
 —  
 — 

Granted 
 250,000  
$0.91 

Vested 
 (62,501) 
 0.91 

Balance at March 31, 2024 
$187,499  
$0.91 

  
The
total intrinsic value of RSUs outstanding as of March 31, 2024 was approximately $347,000. The unamortized compensation cost at March
31, 2024 was approximately $171,000 related to RSUs and is expected to be recognized as expense over a period of approximately 2.25 years.
 
The
following table summarizes the range of outstanding and exercisable options as of March 31, 2024:
 
     Options Outstanding   Options Exercisable          Weighted                          Average                          Remaining   Weighted       Weighted              Contractual   Average       Average   Aggregate      Number   Life   Exercise   Number   Exercise   Intrinsic   Range of Exercise Price  Outstanding   (in Years)   Price   Exercisable   Price   Value   $0.93 - $2.00   2,237,066    8.31   $1.48    1,409,750   $1.52   $538,006   $3.95 - $7.51   943,145    7.20    5.29    771,478    5.52    —   $8.61 - $17.70   509,130    7.23    10.53    470,442    10.53    —   $0.93 - $17.70   3,689,341    7.88   $3.70    2,651,670   $4.28   $538,006  
 
The
intrinsic value per share is calculated as the excess of the closing price of the common stock on the Company’s principal trading
market over the exercise price of the option at March 31, 2024.
 


F-16
 

 
NOTE 6
– INCOME TAXES
 
The income
tax provision consisted of the following:
 


  
Year Ended March 31, 

  
2024  
2023 

  
(in thousands) 

Current portion: 
   
  

Federal 
$—  
$— 

State 
 2  
 2 

  
 2  
 2 

Deferred portion: 
    
   

Federal 
 (3,730) 
 (2,933)

State 
 (657) 
 (1,467)

  
 (4,387) 
 (4,400)

Change in valuation allowance 
 4,387  
 4,400 

Provision for income taxes 
$2  
$2 

 
At March 31, 2024, the Company had net operating
loss carryforwards (NOLs) of approximately $35,000,000 for federal income tax purposes and $50,400,000 for state income tax purposes.
These NOLs are available to reduce future taxable income and will expire at various times from 2037 through 2045, except federal NOLs
from fiscal 2018 and later, which will never expire.
 
The Company also had federal research and development
tax credit carryforwards of approximately $2,100,000, which will begin expiring at various times from 2038 through 2044, and state research
and development credits of approximately $500,000, which do not have an expiration date.
 
A
reconciliation of income taxes provided at the federal statutory rate to the actual income tax provision is as follows:
 


  
Year Ended March 31, 

  
2024  
2023 

Federal statutory rate 
 (21)% 
 (21)%

State tax rate, net of federal benefit 
 (6)% 
 (6)%

Research and development tax credits 
 (7)% 
 (6)%

Change in valuation allowance 
 32% 
 29%

Other 
 2% 
 4%

Effective income tax rate 
 —% 
 —%

 
The
losses before income tax provision for the years ended March 31, 2024 and 2023 were solely attributable to US operations. Significant
components of the Company’s deferred tax assets and liabilities were (in thousands):
 


  
March 31, 

  
2024  
2023 

Net operating loss carryforwards 
$10,860  
$8,742 

Capitalized research and development expense 
 3,058  
 1,933 

Stock-based compensation expense 
 2,818  
 2,587 

Research and development tax credits 
 2,568  
 1,658 

Property and equipment 
 193  
 105 

Total deferred tax assets 
 19,497  
 15,025 

Section 179 assets 
 (239) 
 (111)

Reserves, accruals and other 
 (49) 
 (92)

Total deferred tax liabilities 
 (288) 
 (203)

Less: valuation allowance 
 (19,209) 
 (14,822)

Deferred tax assets, net 
$—  
$— 
 



F-17
 

 
Based
on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at March
31, 2024 and 2023, will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred
tax assets at March 31, 2024 and 2023.
 
Management
has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated
financial statements at March 31, 2024 and 2023. The Company does not expect any significant changes in its unrecognized tax benefits
within twelve months of the reporting date.
 
NOTE 7
– ROYALTY AGREEMENT
 
In
July 2017, the Company entered into a royalty agreement with its founder, then-chief executive officer, president and major shareholder
(the Founder). Pursuant to the agreement, the Founder assigned and transferred all of his rights in the intellectual property of Quasuras
in return for future royalty payments on the Company’s product. The Company is obligated to make royalty payments under the agreement
to the Founder on any sales of the royalty product sold or otherwise commercialized by the Company equal to (a) $0.75 on each sale of
a royalty product or (b) 5% of the gross sale price of the royalty product, whichever is less. The royalty payments will cease, and the
agreement will terminate, at such time as the total sum of royalty payments actually paid to the Founder, pursuant to the agreement,
reaches $10,000,000. The Company has the option to terminate the agreement at any time upon payment, to the Founder, of the difference
between total royalty payments actually made to him to date and the sum of $10,000,000. All payments of the royalties, if due, for the
preceding quarter, will be made by the Company to the Founder within 30 days after the end of each calendar quarter.
 
NOTE 8
– COMMITMENTS AND CONTINGENCIES
 
Litigations,
Claims and Assessments
 
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course
of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable
settlements.
 
Indemnification
 
In
the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties
from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses
arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation
or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also
entered into indemnification agreements with its officers and directors. No amounts were reflected in the Company’s consolidated
financial statements for the years ended March 31, 2024 and 2023 related to these indemnifications. The Company has not estimated the
maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique
facts and circumstances applicable to each particular agreement. To date, the Company has not made any payments related to these indemnification
agreements.
 
Purchase
Obligations 
 
The
Company’s primary purchase obligations include purchase orders for machinery and equipment. At March 31, 2024, the Company had
outstanding purchase orders for machinery and equipment and related expenditures of approximately $1,100,000.
  
In December 2023, the Company signed a device integration agreement
with a provider of connected-care and remote monitoring diabetes technology solutions. As of March 31, 2024, the Company had a remaining
obligation under the device integration agreement of approximately $400,000 over three years for technology license fees.
 
NOTE 9
– RELATED PARTY TRANSACTIONS
 
Manchester
Management Company, LLC (MMC), as the general partner of Manchester Explorer, LP (Explorer), combined with the holdings of its affiliates,
JEB Partners LP, James Besser and Morgan Frank, owned approximately 11% of the Company’s outstanding shares of common stock as
of March 31, 2024. Mr. Besser is the Company’s chief executive officer and a managing member of MMC. Mr. Frank is one of our directors
and serves as the portfolio manager of Explorer and as a managing member of MMC.
 
In
February 2024, Explorer purchased 900,000 shares of common stock in the 2024 Offering at the public offering price per share of $1.10
for aggregate gross proceeds to the Company of $990,000.
 
The
daughter of the Founder is an employee of the Company. During the years ended March 31, 2024 and 2023, the Company paid her approximately
$137,000 and $201,000, respectively, which includes the aggregate grant date fair values, as determined pursuant to FASB ASC Topic 718,
of stock options granted to her during each year.
 

F-18
 

 
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM
9A. CONTROLS AND PROCEDURES
 
Evaluation
of Disclosure Controls and Procedures
 
Disclosure
controls and procedures are designed to ensure that information required to be disclosed in the reports filed with or furnished to the
Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed
under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer,
to allow timely decisions regarding required disclosure.
 
Under
the supervision and with the participation of our management, including our chief executive officer and our chief financial officer,
we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based on this evaluation, our management
concluded that as of March 31, 2024, our disclosure controls and procedures were effective.
 
Management’s
Annual Report on Internal Control over Financial Reporting
 
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship
of possible controls. Internal control over financial reporting is the process designed by, or under the supervision of, our chief executive
officer and chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance
with generally accepted accounting principles, and includes those policies and procedures that: (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management
and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.
 


43
 

 
Because
of its inherent limitations, cost-effective internal controls over financial reporting may not prevent or detect misstatements. All internal
control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention
of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with
respect to consolidated financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
 
Under
the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted
an assessment of the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual
Report on Form 10-K. In making this assessment, we used the criteria based on the framework in Internal Control—Integrated Framework
(2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management
concluded that our internal control over financial reporting was effective as of March 31, 2024.
 
Changes
in Internal Control over Financial Reporting
 
There
were no changes in our internal controls over financial reporting during the fourth fiscal quarter of 2024 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM
9B. OTHER INFORMATION
 
None.
 
ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
 
Not applicable.
 


44
 

 
PART
III
 
ITEM
10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
 
The
names of our directors, executive officers and certain information about each of them at March 31, 2024 are set forth below.
 


Name
 
Age
 
Position

James Besser
 
48
 
Chief Executive Officer

Paul DiPerna
 
65
 
President, Chief Financial
    Officer, Treasurer and Chairman of the Board of Directors

Kevin Schmid
 
64
 
Chief Operating Officer

Duane DeSisto (1)
 
69
 
Director

Steven Felsher(2)(3)
 
75
 
Director

Morgan C. Frank
 
52
 
Director

Philip Sheibley(2)(3)
 
65
 
Director

Carmen Volkart(1)(2)
 
63
 
Director

Ellen O’Connor Vos
 
68
 
Director

 

(1)Member
                                            of Compensation Committee

 

(2)Member
                                            of Audit Committee

 

(3)Member
                                            of Nominating and Governance Committee

 
There
are no family relationships among any of our directors or executive officers.
 
The
principal occupations and positions for at least the past five years of our directors and executive officers are described below.
 
James
“Jeb” Besser. Mr. Besser has served as our chief executive officer since February 2022 and combines over 25 years of
experience in alternative investments, strategic advisory, corporate strategy and corporate governance. Since 1999, he has been a Managing
Member at Manchester Management Company, LLC (“Manchester”), an investment management firm. Mr. Besser is also currently
a director of River Stone Biotech, a development stage specialty bioprocessing company. He holds a B.A. in history from Brown University.
We believe that Mr. Besser is qualified to serve as member of our board of directors due to his extensive prior experience conducting
financial analysis of public companies (certain of which were in the development stage), including such public companies’ management
teams, products, including products in the development stage, the potential markets for such products and other factors that could affect
the likelihood and timing of success and market penetration of such entities’ products as well as his capital raising activities.
We believe this provides us with valuable insights into the financial markets and investment criteria of institutional and other investors
as well as capital raising activities.
 
Paul
DiPerna. Mr. DiPerna has been our chairman, chief financial officer, president and treasurer since we acquired Quasuras, Inc. (“Quasuras”)
in July 2017. He also served as our chief executive officer from July 2017 until August 2021, and as our Secretary from July 2017 to
October 2021. In 2015, he founded Quasuras, an early-stage medical device company developing an insulin pump product, and, until its
acquisition by us, he served as its chief executive officer and chairman. Prior to that, Mr. DiPerna founded Fuel Source Partners, LLC
to incubate early stage medical device products and accumulate technical talent. Our current pump product was one of such proposed products
and was spun-out to Quasuras in 2015. From 2012 to 2015, he served as a co-inventor at a private company with property rights in a medical
device used for blood borne infection control called the Curos Cap, which was acquired by 3M Corporation. In 2003, Mr. DiPerna founded
Tandem Diabetes Care, Inc. (“Tandem”) and held various positions, including as director, chief executive officer and chief
technology officer and was primarily responsible for the design concept and development of Tandem’s initial insulin pump. Prior
to that, he held executive and management positions at Baxter Healthcare Corporation (“Baxter”) where he was tasked with
identifying synergistic opportunities in the diabetes industry. As a result, Mr. DiPerna developed substantial expertise and knowledge
in the diabetes industry and led attempts by Baxter to acquire three insulin pump manufacturers. Previously, he held mechanical design
engineering positions in the automated test equipment and blood separation sciences industries. Mr. DiPerna holds approximately 70 patents
in medical device and microfluidic technology and has achieved numerous product clearances with the FDA. He has also achieved multiple
successful exits with previous companies. Mr. DiPerna received a Masters in Engineering Management from Northeastern University and a
B.S. in Mechanical Engineering from the University of Massachusetts and has spent over 35 years in the medical-device industry. We believe
that Mr. DiPerna is qualified to serve as the chairman of our board of directors due to his extensive knowledge and experience in the
medical-device industry generally, and, in particular, with regard to insulin pumps and the diabetes industry, as well as his management
and leadership experience from holding director and senior executive positions in other public and private companies and leading project
development teams of medical device companies.
 


45
 

 
Kevin
Schmid. Mr. Schmid has served as our chief operating officer since July 21, 2022. He has over 19 years of experience in medical device
senior management and high-volume global manufacturing operations. He served as a consultant to the Company from March 2022 until his
hire date. Mr. Schmid has served as a member of the board of directors of Eitan Medical, an Israel based provider of connected infusion
and wearable drug delivery solutions, since 2018. From 2018 through June 2021, he served as the Chief Executive Officer and a board member
of Common Sensing, Inc., a disposable injector pen dose monitoring and reporting technology company. From 2016 to 2017, Mr. Schmid was
Vice President of Drug Delivery Systems for the Stevanato Group, a provider of innovative packaging and drug delivery solutions for the
pharmaceutical industry. From 2003 to 2015, Mr. Schmid was Vice President of Manufacturing, Operations, and Drug Delivery Systems for
Insulet Corporation. He has a BSME degree from Clarkson University and an MBA from Sacred Heart University.
 
Duane
DeSisto. Mr. DeSisto was appointed to our board of directors in July 2023. He has over 45 years of progressive management experience
and over 25 years of experience in the medical device industry as a member of senior management and as a board member at multiple public
companies. From 2001 to 2014, he served as the chief executive officer of Insulet Corporation, manufacturer of the world’s first
patch insulin pump. Prior to 2001, he held executive positions with Paper Exchange, an e-business solution for the pulp and paper industry,
AAI-Foster Grant, a sunglass and eyeglass provider to point-of-purchase retail, and Zoll Medical, a defibrillator manufacturer. He has
an undergraduate degree from Providence College and a masters of business administration degree from Bryant University. We believe that
Mr. DeSisto is qualified to serve on our board of directors because of his extensive background in operational leadership and commercialization
of advanced medical devices and therapies, including insulin pumps. In addition, he has served as an executive officer and member of
the board of directors at multiple public companies.
 
Steven
Felsher. Mr. Felsher was appointed to our board of directors in November 2021. Mr. Felsher is an experienced executive with respect
to finance, administration, governance and other aspects of public and private company management. He served as a member of the board
of directors of Signal Hill Acquisition Corp., a special purpose acquisition company, from March 2021 to February 2023. From August 2018
to July 2020, he served as a member of the board of directors of Sito Mobile, Inc., a publicly-traded company that provided customized,
data-driven solutions for brands spanning all forms of media. From January 2011 to June 2019, Mr. Felsher was a senior advisor at Quadrangle
Group LLC, a private investment firm focused on the information and communications technology sectors. He spent a substantial portion
of his career with Grey Global Group Inc., a global marketing services company, where he served as a senior executive from 1979 until
2007, most recently as vice chairman and chief financial officer. He holds a BA in classical Greek from Dickinson College and a J.D.
from Yale University School of Law. We believe that Mr. Felsher is qualified to serve on our board of directors because of his extensive
business experience with administration, governance, capital allocation and other aspects of public and private company management.
 


46
 

 
Morgan
C. Frank. Mr. Frank was appointed to our board of directors in April 2017. In August 2022, he was appointed as chairman of the board
of directors of SANUWAVE Health, Inc., a publicly-traded provider of wound-care products. Mr. Frank has worked with Manchester, LP since
May 2002, and, prior to such time, he was a founder and managing director at First Principles Group, a boutique consultancy and principal
investor specializing in corporate restructuring, restarts, intellectual property assessment and salvage, and spin outs. Prior to such
time, Mr. Frank spent approximately five years as an analyst and portfolio manager at Hollis Capital, a San Francisco based hedge fund
and prior thereto, Mr. Frank worked for an independent private client group at Paine Webber specializing in primary research to develop
investment ideas (particularly short sale ideas) for institutional clients. Prior to his employment at Paine Webber, Mr. Frank was a
currency trader for Eastern Vanguard. Mr. Frank holds a BA in Economics and in Political Science from Brown University. We believe that
Mr. Frank is qualified to serve as member of our board of directors due to his extensive prior experience conducting financial analysis
of public companies (certain of which were in the development stage), including such public companies’ management teams, products,
including products in the development stage, the potential markets for such products and other factors that could affect the likelihood
and timing of success and market penetration of such entities’ products as well as his capital raising activities. We believe this
provides us with valuable insights into the financial markets and investment criteria of institutional and other investors as well as
capital raising activities.
 
Philip
Sheibley. Mr. Sheibley was appointed to our board of directors in November 2021. Mr. Sheibley is an experienced executive and venture
capitalist. Since 2011, he has served as a principal at Alumni Investment Partners, a private equity firm. From 1981 to 2010, Mr. Sheibley
served as a management and technology consultant with Accenture, where he focused on the life sciences area, holding a variety of leadership
positions, including North American industry director for life sciences and global lead for management consulting. Mr. Sheibley holds
a B.S. in industrial and systems engineering with a business minor from Lehigh University. We believe that Mr. Sheibley is qualified
to serve on our board of directors because of his extensive business experience in the life sciences area and experience with venture
capital investment and consulting, including financing transactions for early- stage and scale-up stage companies, assisting with scale-up
strategy/execution, and participating as a board member in the medical products industry.
 
Carmen Volkart. Ms. Volkart was appointed
to our board of directors in December 2019. Since January 2023, she has served as a member of the board of directors of Tactile Systems
Technology, Inc. (Tactile Medical), a Nasdaq-listed, medical technology company developing and marketing at-home therapies for people
suffering from underserved, chronic conditions. Ms. Volkart served as chief financial officer of Natureworks LLC, an advanced materials
company offering a portfolio of renewably-sourced polymers, from October 2018 to September 2023. She served as a member of the board
of directors, including as a member of the audit committee of Antares Pharma, Inc., a Nasdaq-listed, specialty pharmaceutical company,
from October 2021 to May 2022, when it was acquired by another Nasdaq-listed company. From October 2012 to July 2018, Ms. Volkart served
as chief financial officer and, for a portion of that time, as senior vice president of commercialization for NxThera, Inc., a medical
device company pioneering the application of convective radiofrequency thermotherapy to treat endourological conditions. She served as
global chief financial officer of Tornier N.V. from 2010 to 2012, and was chief operating and financial officer, corporate secretary,
compliance officer and treasurer of Spine Wave, Inc. from 2006 to 2010. Prior to 2006, Ms. Volkart held various executive and financial
positions at American Medical Systems, Inc., Medtronic, Inc. and Honeywell, Inc. She holds a B.S. in accounting from the University of
North Dakota and an MBA with a concentration in strategic management from the University of Minnesota. We believe that Ms. Volkart is
qualified to serve on our board of directors because of her substantial financial and public-company experience, as she has served as
chief financial officer at multiple medical device and other companies. 
Ellen
O’Connor Vos. Ms. Vos was appointed to our board of directors in May 2021 and served as our chief executive officer from August
2021 until February 23, 2022. Ms. Vos has served as a member of VosHealth LLC since November 2020. Prior to that, she served as the president
and chief executive officer of the Muscular Dystrophy Association from October 2017 to November 2020. Previously, Ms. Vos had been chief
executive officer of ghg | greyhealth group from 1996 to 2017, and she has been a champion of using digital capabilities to improve the
public health. Ms. Vos also serves on the board of OptimizeRX Corporation, a publicly- traded digital health company, and the Jed Foundation,
a leading nonprofit dedicated to protecting the emotional health of college students, and was a founding board member of MMRF, a pioneering
cancer research foundation. Ms. Vos holds a B.S. in nursing from Alfred University. We believe that Ms. Vos is qualified to serve on
our board of directors because of her executive experience and extensive executive skills in digital marketing, commercialization and
communications in the healthcare industry.
 
Family
Relationships.
 
There
are no family relationships between any of our directors or executive officers.
 

47
 

 
Involvement
in Legal Proceedings
 
To
our knowledge, none of our executive officers or our directors has, during the last ten years:
 

●had
                                            any bankruptcy petition filed by or against the business or property of the person, or of
                                            any partnership, corporation or business association of which he was a general partner or
                                            executive officer, either at the time of the bankruptcy filing or within two years prior
                                            to that time;

 

●been
                                            subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
                                            of any court of competent jurisdiction or federal or state authority, permanently or temporarily
                                            enjoining, barring, suspending or otherwise limiting, his involvement in any type of business,
                                            securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
                                            or to be associated with persons engaged in any such activity;

 

●been
                                            found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity
                                            Futures Trading Commission to have violated a federal or state securities or commodities
                                            law, and the judgment has not been reversed, suspended, or vacated;

 

●been
                                            the subject of, or a party to, any federal or state judicial or administrative order, judgment,
                                            decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement
                                            of a civil proceeding among private litigants), relating to an alleged violation of any federal
                                            or state securities or commodities law or regulation, any law or regulation respecting financial
                                            institutions or insurance companies including, but not limited to, a temporary or permanent
                                            injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
                                            cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting
                                            mail or wire fraud or fraud in connection with any business entity; or

 

●been
                                            the subject of, or a party to, any sanction or order, not subsequently reversed, suspended
                                            or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange
                                            Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act),
                                            or any equivalent exchange, association, entity or organization that has disciplinary authority
                                            over its members or persons associated with a member.

 
To
our knowledge, there are no material proceedings to which any director, officer or affiliate of ours, any owner of record or beneficially
of more than 5% of any class of voting securities of us, or any associate of any such director, officer, affiliate of ours, or security
holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.
 
Arrangements
for Appointment of Directors and Officers
 
Pursuant
to the Reorganization and Share Exchange Agreement, hereinafter referred to as the Share Agreement, dated as of July 24, 2017, by and
among us, Quasuras, Mr. DiPerna and the other stockholders of Quasuras, until July 24, 2022, our board of directors was required to consist
of no more than five and no less than two directors of which (i) Manchester Explorer, L.P. has the right to appoint two directors, pursuant
to which Manchester Explorer, L.P. appointed Mr. Frank and Ms. Volkart and (ii) Mr. DiPerna, in addition to being our chairman of the
board, had the right to appoint two additional directors, pursuant to which he appointed Liam Burns, who resigned from our board of directors
in December 2021, and Febbo. In May 2021, the parties amended the Share Agreement and removed Manchester Explorer L.P’s and Mr.
DiPerna’s rights to appoint directors. In addition, the parties agreed that Mr. DiPerna shall remain chairman of our board of directors
until July 2022; provided, that in the event Mr. DiPerna resigns or is otherwise replaced as our chief executive officer, Mr. DiPerna
shall remain as chairman of our board of directors for an additional period of three years. Following such amendment, our board of directors
increased the size of the board to six members and, on May 18, 2021, appointed Ms. Vos as a director to our board.
 


48
 

 
Communications
with our Board of Directors
 
Stockholders
who desire to communicate with the board of directors, or a specific director, may do so by sending the communication addressed to either
the board of directors or any individual director, c/o Modular Medical, Inc., 10740 Thornmint Road, San Diego, California 92127. These
communications will be delivered to the board of directors, or any individual director, as specified.
 
Corporate
Governance
 
Board
Leadership Structure and Role in Risk Oversight
 
Due to our small size and early stage, we have
not adopted a formal policy on whether the chairman and chief executive officer positions should be separate or combined. Since 2017,
Mr. DiPerna has been serving as our chairman, and, since February 2022, Mr. Besser has been serving as our chief executive officer. Our
board of directors has oversight responsibility for our risk management processes. Our board of directors receives and reviews periodic
reports from management, auditors, legal counsel, and others, as considered appropriate, regarding our assessment of risks. Our board
of directors will focus on the most significant risks facing us and our general risk management strategy, and also ensure that risks
undertaken by us are consistent with our appetite for risk. While our board of directors oversees our risk management processes, management
is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach
for addressing the risks facing us and that the leadership structure of our board of directors supports this approach. 
We
have established an audit committee, a compensation committee, and a nominating and governance committee. Each committee’s members
and functions are described below.
 
Audit
Committee
 
Our
board of directors established the audit committee (the Audit Committee) for the purpose of overseeing the accounting and financial reporting
processes and audits of our financial statements. The Audit Committee also is charged with reviewing any internal control violations
under our whistleblower policy. The responsibilities of our audit committee are described in the Audit Committee Charter adopted by our
board of directors, a current copy of which can be found on the investors section of our website, www.modular-medical.com.
 
Mr.
Felsher, Mr. Sheibley and Ms. Volkart are the current members of the Audit Committee. Mr. Felsher serves as the chairperson and has been
designated by the board of directors as the “audit committee financial expert,” as defined by Item 407(d)(5) of Regulation
S-K under the Securities Act and the Exchange Act. That status does not impose duties, liabilities or obligations that are greater than
the duties, liabilities or obligations otherwise imposed on Mr. Felsher as a member of the audit committee and the board of directors,
however. Our board of directors has determined that each of our Audit Committee members satisfies the “independence” requirements
of the Nasdaq listing rules and meets the independence standards under Rule 10A-3 under the Exchange Act.
 
Compensation
Committee
 
Our
board of directors established the compensation committee (the Compensation Committee) for the purpose of reviewing, recommending and
approving our compensation policies and benefits, including the compensation of all of our executive officers and directors. Mr. DeSisto
and Ms. Volkart are the current members of the compensation committee, and Mr. DeSisto serves as the chairperson. Each of our Compensation
Committee members satisfies the “independence” requirements of the Nasdaq listing rules and meets the independence standards
under Rule 10A-3 under the Exchange Act.
 
Our
Compensation Committee is responsible for reviewing, recommending and approving our compensation policies and benefits, including the
compensation of all of our executive officers and directors, and it also has the principal responsibility for the administration of our
equity incentive plan. The responsibilities of our compensation committee are more fully described in the Compensation Committee Charter
adopted by our board of directors, a current copy of which can be found on the investors section of our website, www.modular-medical.com.
 
Nominating
and Governance Committee
 
Our
board of directors established the nominating and governance committee (the Nominating and Governance Committee) for the purpose of (i)
carrying out the responsibilities delegated by the board of directors relating to our director nominations process, (ii) developing and
assessing our corporate governance policies, (iii) review our strategies, activities, and policies regarding environmental, social, and
governance, or ESG, matters and (iv) provide oversight for the evaluation of the performance of the board of directors and its committees.
The Nominating and Governance Committee consists of Mr. Sheibley and Mr. Felsher, and Mr. Sheibley serves as the chairperson. Each of
the members of our Nominating and Governance Committee satisfies the “independence” requirements of the Nasdaq listing rules
and meets the independence standards under Rule 10A-3 under the Exchange Act. The responsibilities of our Nominating and Governance committee
are more fully described in the Nominating and Governance Committee Charter adopted by our board of directors, a current copy of which
can be found on the investors section of our website, www.modular-medical.com.
 


49
 

 
The
Nominating and Governance Committee will consider persons recommended by stockholders for inclusion as nominees for election to our board
of directors if the information required by our bylaws is submitted in writing in a timely manner addressed and delivered to our secretary
at the address of our executive offices. The Nominating and Governance Committee will identify and evaluate nominees for our board of
directors, including nominees recommended by stockholders, based on numerous factors it considers appropriate, some of which may include
strength of character, mature judgment, career specialization, relevant technical skills, diversity, and the extent to which the nominee
would fill a present need on our board of directors.
 
Director
Independence
 
Our
board of directors has determined that each of the current directors, with the exception of Mr. DiPerna, Mr. Frank and Ms. Vos, is “independent,”
as defined by the listing rules of the NASDAQ Stock Market, or Nasdaq, and the rules and regulations of the SEC. Our board of directors
has standing Audit, Compensation and Nominating and Governance Committees, each of which is comprised solely of independent directors
in accordance with the Nasdaq listing rules. No director qualifies as independent unless the board of directors affirmatively determines
that he has no direct or indirect relationship with us that would impair his independence. We independently review the relationship of
the Company to any entity employing a director or on whose board of directors such director is serving currently.
 
Code of
Business Conduct and Ethics for Employees, Executive Officers and Directors
 
We
have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and
members of our board of directors. The Code of Conduct is available on our website at www.modular-medical.com. Our Nominating and Governance
Committee is responsible for overseeing the Code of Conduct, and our board of directors must approve any waivers of the Code of Conduct.
In addition, we intend to post on our website all disclosures that are required by law concerning any amendments to, or waivers from,
any provision of the Code of Conduct. 
 
Board
Diversity
 
We
seek diversity in experience, viewpoint, education, skill, and other individual qualities and attributes to be represented on our board
of directors. We believe directors should have various qualifications, including individual character and integrity; business experience;
leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting,
and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our company. We also believe
the skill sets, backgrounds, and qualifications of our directors, taken as a whole, should provide a significant mix of diversity in
personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities. Nominees are not to be discriminated
against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law. The
assessment of prospective directors is made in the context of the perceived needs of our board of directors from time to time.
 
All
of our directors have held high-level positions in business or professional service firms and have experience in dealing with complex
issues. We believe that all of our directors are individuals of high character and integrity, are able to work well with others, and
have committed to devote sufficient time to the business and affairs of our company. In addition to these attributes, the description
of each director’s background set forth above indicates the specific qualifications, skills, perspectives, and experience necessary
to conclude that each individual should continue to serve as a director of ours.
 
Delinquent
Section 16(a) Reports
 
Section
16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own 10% or more of a class of securities
registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the
SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish
us with copies of all reports filed by them in compliance with Section 16(a).
 
Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to us during fiscal 2024, including
those reports that we filed on behalf of our directors and executive officers, no director, executive officer, beneficial owner of more
than 10% of the outstanding common stock, or any other person subject to Section 16 of the Exchange Act, failed to file with the SEC
on a timely basis during the fiscal year ended March 31, 2024, except that in July 2023 Mr. DeSisto failed to timely file a Form
3 to report his initial beneficial ownership and a Form 4 to report a restricted stock unit award.
 

50
 

 
ITEM
11. EXECUTIVE COMPENSATION
 
SUMMARY
COMPENSATION TABLE
 
The following
table sets forth compensation information for fiscal 2024 and 2023 for each of our named executive officers.
 


  
   
Salary  
Stock Awards  
Option Awards  
Non-Equity
    Incentive Plan Compensation  
All Other
    Compensation  
Total 

Name and
    Principal Position 
Year  
($)  
($)  
($)(1)  
($)  
($)  
($) 

James E. Besser, 
 2024  
 —  
 —  
 130,480  
        —  
        —  
 130,480 

Chief Executive Officer
    (2) 
 2023  
 —  
 —  
 —  
 —  
 —  
 — 

Paul DiPerna, 
 2024  
 300,000  
 —  
 182,792  
 —  
 —  
 482,792 

President, President Chief
    Financial Officer, Treasurer and Chairman 
 2023  
 300,000  
 —  
 189,413  
 —  
 —  
 489,413 

Kevin Schmid, 
 2024  
 250,000  
 —  
 160,510  
 —  
 —  
 410,510 

Chief Operating Officer
    (4) 
 2023  
 176,121  
 —  
 701,945  
 —  
 —  
 878,066 

 

(1)Award
                                            amounts reflect the aggregate grant date fair value with respect to awards granted, as determined
                                            pursuant to Financial Accounting Standards Board (FASB) ASC Topic 718. The assumptions used
                                            to calculate the aggregate grant date fair value of option awards are set forth in the notes
                                            to the consolidated financial statements included in item 8 of this Report. These amounts
                                            do not reflect actual compensation earned or to be earned by our named executive officers.

 

(2)Mr.
                                            Besser was appointed our chief executive officer in February 2022, and he is paid de minimis
                                            annual compensation of $1.00.

 

(4)Mr.
                                            Schmid was appointed our chief operating officer in July 2022 at an annual base salary of
                                            $250,000.

 

51
 

 
Outstanding
Equity Awards at Fiscal Year-End
 
The
following table shows certain information regarding outstanding equity awards held by our named executive officers as of March 31, 2024.
 


Name 
Number
    of Securities Underlying Unexercised Options (#) Exercisable  
Number
    of Securities Underlying Unexercised Options (#) Unexercisable  
Option
    Exercise Price($)  
Option
    Expiration Date(1)

James E. Besser 
 135,136(2) 
 —  
 1.11  
10/2/2033

Paul DiPerna 
 1,155(3) 
 —  
 9.48  
6/1/2030

  
 1,169(4) 
 —  
 9.48  
5/1/2030

  
 1,170(5) 
 —  
 9.48  
4/1/2030

  
 1,660(6) 
 —  
 7.44  
3/2/2030

  
 1,745(7) 
 —  
 7.44  
2/1/2030

  
 1,727(8) 
 —  
 7.44  
1/1/2030

  
 1,809(9) 
 —  
 6.75  
12/1/2029

  
 1,811(10) 
 —  
 6.75  
11/1/2029

  
 1,721(11) 
 —  
 6.75  
10/1/2029

  
 1,662(12) 
 —  
 6.75  
9/15/2029

  
 1,666(13) 
 —  
 6.75  
8/15/2029

  
 1,660(14) 
 —  
 6.75  
7/15/2029

  
 1,650(15) 
 —  
 6.75  
6/15/2029

  
 1,677(16) 
 —  
 6.75  
5/15/2029

  
 1,624(17) 
 —  
 6.75  
4/15/2029

  
 1,694(18) 
 —  
 6.75  
3/15/2029

  
 1,641(19) 
 —  
 6.75  
2/15/2029

  
 1,603(20) 
 —  
 6.75  
1/15/2029

  
 1,775(21) 
 —  
 6.75  
12/15/2028

  
 1,775(22) 
 —  
 6.75  
11/15/2028

  
 6,005(23) 
 —  
 1.98  
10/15/2028

  
 6,005(24) 
 —  
 1.98  
09/15/2028

  
 6,005(25) 
 —  
 1.98  
08/15/2028

  
 100,000(26) 
 —  
 6.75  
11/25/2029

  
 28,750(27) 
 16,250(27) 
 4.24  
4/14/2032

  
 —  
 50,000(28) 
 1.65  
4/3/2033

  
 90,091(29) 
 —  
 1.11  
10/2/2033

  
 —  
 45,046(30) 
 1.11  
10/2/2033

Kevin Schmid 
 97,222(31) 
 77,778(31) 
 4.24  
7/21/2032

  
 —  
 100,000(32) 
 1.50  
4/3/2033

  
 37,538(33) 
 —  
 1.11  
10/2/2033

  
 —  
 18,769(34) 
 1.11  
10/2/2033

 

(1)The
                                            standard option term is ten years, but all of the options expire automatically unless exercised
                                            within 90 days after the cessation of service as an employee, director or consultant.

 

(2)The
                                            option was granted on October 2, 2023, and the shares subject to this option vested in January
                                            2024 upon the Company’s 510(k) premarket submission to the FDA for its initial pump
                                            product.

 

(3)The
                                            option was granted on June 1, 2020, and the shares subject to this option were fully vested
                                            on the grant date.

 

(4)The
                                            option was granted on May 1, 2020, and the shares subject to this option were fully vested
                                            on the grant date.

 

(5)The
                                            option was granted on April 1, 2020, and the shares subject to this option were fully vested
                                            on the grant date.

 

(6)The
                                            option was granted on March 2, 2020, and the shares subject to this option were fully vested
                                            on the grant date.

 

(7)The
                                            option was granted on February 1,2020, and the shares subject to this option were fully vested
                                            on the grant date.

 


52
 

 

(8)The
                                            option was granted on January 1, 2020, and the shares subject to this option were fully vested
                                            on the grant date.

 

(9)The
                                            option was granted on December 1, 2019, and the shares subject to this option were fully
                                            vested on the grant date.

 

(10)The
                                            option was granted on November 1, 2019, and the shares subject to this option were fully
                                            vested on the grant date.

 

(11)The
                                            option was granted on October 1, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(12)The
                                            option was granted on September 15, 2019, and the shares subject to this option were fully
                                            vested on the grant date.

 

(13)The
                                            option was granted on August 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(14)The
                                            option was granted on July 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(15)The
                                            option was granted on June 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(16)The
                                            option was granted on May 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(17)The
                                            option was granted on April 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(18)The
                                            option was granted on March 15, 2019, and the shares subject to this option were fully vested
                                            on the grant date.

 

(19)The
                                            option was granted on February 15, 2019, and the shares subject to this option were fully
                                            vested on the grant date.

 

(20)The
                                            option was granted on January 15, 2019, and the shares subject to this option were fully
                                            vested on the grant date.

 

(21)The
                                            option was granted on December 15, 2018, and the shares subject to this option were fully
                                            vested on the grant date.

 

(22)The
                                            option was granted on November 15, 2018, and the shares subject to this option were fully
                                            vested on the grant date.

 

(23)The
                                            option was granted on October 15, 2018, and the shares subject to this option were fully
                                            vested on the grant date.

 

(24)The
                                            option was granted on September 15, 2018, and the shares subject to this option were fully
                                            vested on the grant date.

 

(25)The
                                            option was granted on August 15, 2018, and the shares subject to this option were fully vested
                                            on the grant date.

 

(26)The
                                            option was granted on November 25, 2019, and the shares subject to this option vested monthly
                                            over three years commencing January 1, 2020, subject to continued service as an employee,
                                            director or consultant.

 

(27)The
                                            option was granted on April 14, 2022, and the shares subject to this option vest: i) one-third
                                            on the annual anniversary of the grant date and ii) the remaining two-thirds monthly over
                                            the next two years, subject to continued service as an employee, director or consultant

 

(28)The
                                            option was granted on April 3, 2023, and the shares subject to this option vest: i) one-third
                                            on the annual anniversary of the grant date and ii) the remaining two-thirds monthly over
                                            the next two years subject to continued service as an employee, director or consultant.

 

(29)The
                                            option was granted on October 2, 2023, and the shares subject to this option vested in January
                                            2024 upon the Company’s 510(k) premarket submission to the U.S. Food and Drug Administration
                                            (“FDA”) for its initial pump product.

 

(30)The
                                            option was granted on October 2, 2023, and the shares subject to this option vest if the
                                            Company receives notification of FDA clearance of the 510(k) premarket submission on or before
                                            August 1, 2024, subject to continued service as an employee, director or consultant.

 

(31)The
                                            option was granted on July 21, 2022, and the shares subject to this option vest: i) one-third
                                            on the annual anniversary of the grant date and ii) the remaining two-thirds monthly over
                                            the next two years subject to continued service as an employee, director or consultant.

 

(32)The
                                            option was granted on April 3, 2023, and the shares subject to this option vest: i) one-third
                                            on the annual anniversary of the grant date and ii) the remaining two-thirds vest over the
                                            next two years subject to continued service as an employee, director or consultant.

 


53
 

 

(33)The
                                            option was granted on October 2, 2023, and the shares subject to this option vested in January
                                            2024 upon the Company’s 510(k) premarket submission to the FDA for its initial pump
                                            product.

 

(34)The
                                            option was granted on October 2, 2023, and the shares subject to this option vest if the
                                            Company receives notification of FDA clearance of the 510(k) premarket submission on or before
                                            August 1, 2024, subject to continued service as an employee, director or consultant.

 
Employment
Agreements
 
We
have entered into our standard form of employment, confidential information and invention assignment agreement with each of our named
executive officers. We also have entered into agreements to indemnify our directors and executive officers, in addition to the indemnification
provided for in our articles of incorporation and bylaws. These agreements, among other things, provide for indemnification of our directors
and certain executive officers for many expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person’s
services as a director or executive officer of ours, any subsidiary of ours or any other company or enterprise to which such person provided
services at our request.
 
The DiPerna
Employment and Related Agreements
 
We
entered into an employment agreement dated August 1, 2018, with Mr. DiPerna pursuant to which Mr. DiPerna is employed by us as our president.
Mr. DiPerna’s employment agreement had an initial two-year term and automatically renews for additional one-year terms. Pursuant
to such agreement, we agreed to pay Mr. DiPerna: i) an annual salary of $200,000 in cash, ii) $100,000 per year in fully-vested stock
options granted monthly at an exercise price determined by our board of directors in its sole discretion and iii) an annual bonus of
$300,000, payable at the discretion of our board of directors, either in shares or in cash. If the board chooses to pay the bonus in
shares, such shares will be valued at a price determined by our board of directors. Pursuant to such employment agreement (i) if (a)
we terminate Mr. DiPerna’s employment without cause or he resigns with good reason, we will pay Mr. DiPerna a lump sum of $200,000,
and (b) we terminate Mr. DiPerna’s employment for cause, we are not obligated to make any severance payment and Mr. DiPerna will
receive only his base compensation through the last day of his employment, (ii) upon Mr. DiPerna’s death or disability, he will
receive his base compensation through the last day of his employment and will remain eligible for all applicable benefits relative to
death or disability pursuant to any plans that we have in place at such time, and (iii) upon a change of control (as defined in the employment
agreement), Mr. DiPerna will be paid a lump sum of $100,000 within sixty days of the time at which such change of control takes place.
 
In May 2020,
we amended our employment agreement with Mr. DiPerna to provide that in the event of a change in control:
 

●within
                                            60 days of the date the change in control occurs, Mr. DiPerna shall be paid by us or our
                                            successor in interest a lump sum cash payment equal to 12 months of Mr. DiPerna’s then
                                            annual Base Compensation (as defined in the employment agreement); and

 

●immediately
                                            prior to such change of control, any unvested stock options or other unvested securities
                                            of ours issued to Mr. DiPerna shall automatically accelerate and immediately become fully
                                            vested and exercisable.

 
In
June 2020, our board of directors approved an amendment to the employment agreement to provide that Mr. DiPerna’s base salary would
be paid entirely in cash commencing July 1, 2020. The payment of the additional cash component of Mr. DiPerna’s annual base salary
($8,333.33 per month) was initially be deferred (the Deferred Salary) and accrue for Mr. DiPerna’s benefit until we have received
$5,000,000 of cumulative gross proceeds of financing, at which time the Deferred Salary shall be paid to Mr. DiPerna and the salary deferrals
will cease. The salary deferrals ceased and the Deferred Salary was paid to Mr. DiPerna in May 2021. In August 2021, Mr. DiPerna resigned
as our chief executive officer, and he continues to serve as our president, chief financial officer, treasurer and chairman of our board
of directors.
 
If
a change of control occurred on March 31, 2024, under his employment agreement, Mr. DiPerna would be entitled to the following:
 

●payment
                                            of a lump sum of $300,000 within 60 days of the time at which such change of control takes
                                            place.

 

●accelerated
                                            vesting of 111,296 shares of common stock under unvested stock options. The value of the
                                            shares subject to accelerated vesting is calculated as the intrinsic value per share multiplied
                                            by the number of shares that would become fully vested upon a change of control. The intrinsic
                                            value per share would be calculated as the excess of the closing price of the common stock
                                            of $1.85 on the Nasdaq Capital Market on March 28, 2024 over the exercise price of the option.
                                            As of March 31, 2024, the intrinsic value of the shares subject to accelerated vesting was
                                            approximately $67,000.

 
In
connection with our acquisition of Quasuras, we entered into an Intellectual Property Transfer Agreement dated as of July 24, 2017, with
Quasuras and Mr. DiPerna, pursuant to which Mr. DiPerna transferred to us all intellectual property rights owned directly and/or indirectly
by him related to our business. Separately, we agreed to pay Mr. DiPerna, as part of his compensation for services to be performed for
us, pursuant to a royalty agreement, certain fees based upon future sales, if any, of our potential product subject to a maximum $10,000,000
cap on the aggregate amount of fees that Mr. DiPerna could earn from such arrangement.
 


54
 

 
The
Schmid Offer Letter 
 
Pursuant
to an offer letter with the Company (the “Offer Letter”), Mr. Schmid shall receive an annual salary of $250,000 (the “Schmid
Base Salary”) for his services as our chief operating officer. Additionally, he is eligible for an annual discretionary target
incentive bonus of up to 50% of his Base Salary. In connection with his appointment, Mr. Schmid was granted a stock option to purchase
175,000 shares of our common stock. The stock option vests over a three-year period with one-third of the shares subject to the stock
option vesting on the one-year anniversary of the grant date and the remaining shares vesting monthly thereafter, subject to Mr. Schmid’s
continuous service with us. In the event of termination of his employment by us other than for cause or good reason (as defined in the
Offer Letter), Mr. Schmid will receive an amount equal to six months of his then-current base salary as a severance payment.
 
James
Besser 
 
As
compensation for his services as our chief executive officer, Mr. Besser is paid de minimis compensation of $1.00 per year.
 
Director
Compensation
 
In
the first quarter of fiscal 2022, our board of directors approved our outside (non-employee) director compensation plan (the Director
Plan). Pursuant to the Director Plan, outside directors are paid the following annual retainers:
 

●$25,000
                                            for service as a member of the board of directors; and

 

●$5,000
                                            for service as chair of a committee of the board of directors.

 
The
annual retainers are paid in quarterly installments in either cash, options to purchase shares of our common stock or in shares of our
common stock, as directed by each director based on an annual election.
 
In
addition, under the Director Plan, each director receives an annual service equity award of $100,000 paid in quarterly installments
in either options to purchase shares of our common stock or shares of our common stock, as directed by each director based on an
annual election. In July 2022, the Board amended the Director Plan to provide that a minimum price of $10.00 per share of common
stock would be used to calculate the number of shares subject to options or share awards.
 
In
addition, upon appointment to our board of directors, we award our non-employee directors an equity award under our Amended 2017 Equity
Incentive Plan (the 2017 Plan), and such awards vest over three years.
 
The following
table summarizes the compensation earned by our non-employee directors in fiscal 2024:
 


  
Fee Compensation  
Restricted
                                            Stock Awards  
Option
    Awards  
All Other
    Compensation  
Total 

Name 
($)  
($)(1)(2)  
($)(2)(3)  
($)(2)(4)  
($) 

Duane DeSisto 
 22,170  
 227,500  
 —  
 12,103  
 261,773 

William Febbo(5) 
 7,500  
 —  
 —  
 2,328  
 9,828 

Steven Felsher 
 —  
 —  
 36,312  
 4,377  
 40,689 

Morgan Frank 
 —  
 —  
 45,390  
 —  
 45,390 

Philip Sheibley 
 30,000  
 —  
 —  
 14,550  
 60,795 

Carmen Volkart 
 —  
 —  
 36,312  
 3,658  
 39,970 

Ellen O’Connor Vos 
 25,000  
 —  
 36,312  
 —  
 42,562 

 

(1)Mr.
                                            DeSisto was appointed to our board of directors in July 2023, and, upon his appointment,
                                            was granted a restricted stock unit (the “DeSisto RSU”) for 250,000 shares of
                                            our common stock. As of March 31, 2024, 187,499 shares of our common stock remained unvested
                                            under the DeSisto RSU.

 

(2)Award
                                            amounts reflect the aggregate grant date fair value with respect to awards granted, as determined
                                            pursuant to FASB ASC Topic 718. The assumptions used to calculate the aggregate grant date
                                            fair value of option awards are set forth in the notes to the consolidated financial statements
                                            included in Item 8 of this Annual Report on Form 10-K. These amounts do not reflect actual
                                            compensation earned or to be earned by our directors.

 


55
 

 

(3)As
                                            of March 31, 2024, our non-employee directors each held outstanding options to purchase the
                                            following number of shares of our common stock: Steven Felsher, 98,084; Morgan Frank, 177,458;
                                            Philip Sheibley, 16,667; Carmen Volkart; 150,558, Ellen O’Connor Vos, 166,020.

 

(4)Represents
                                            stock awards under the Director Plan; we calculated the estimated fair value of the stock
                                            awards issued to Messrs. DeSisto, Felsher and Sheibley and Ms. Volkart using the closing
                                            price per share of our common stock on the day prior to the grant date in accordance with
                                            the Director Plan.

 

(5)Mr.
                                            Febbo resigned from our board of directors in July 2023.

 
ITEM
12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The
following table sets forth certain information as of May 31, 2024 concerning the ownership of our common stock by:
 

●each
                                            stockholder known by us to be the beneficial owner of more than 5% of the outstanding shares
                                            of our common stock (currently our only class of voting securities);

 

●each
                                            of our directors;

 

●each
                                            of our executive officers; and

 

●all
                                            directors and executive officers as a group.

 
Beneficial
ownership is determined in accordance with Rule 13d-3 of the Exchange Act, and includes all shares over which the beneficial owner exercises
voting or investment power. Shares that are issuable upon the exercise of options, warrants and other rights to acquire common stock
that are presently exercisable or exercisable within 60 days of June 15, 2024 are reflected in a separate column in the table below.
These shares are taken into account in the calculation of the total number of shares beneficially owned by a particular holder and the
total number of shares outstanding for the purpose of calculating percentage ownership of the particular holder. We have relied on information
supplied by our officers, directors and certain stockholders and on information contained in filings with the SEC. Except as otherwise
indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that
the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially
owned by them. The percentage of beneficial ownership is based on 32,463,670 shares of common stock outstanding as of May 31, 2024.
 
Unless
otherwise stated, the business address of each of our directors and executive officers listed in the table is 10740 Thornmint Road, San
Diego, California 92127.
 


Name
    and principal position 
Number
    of Shares Beneficially Owned (Excluding Outstanding Equity Awards and Warrants)(1)  
Number
    of Shares Issuable  on Exercise of Outstanding Equity Awards and Warrants(2)  
Percent
    of Class 

JEB Partners, L.P. 
 330,473(3) 
 —  
 1.02 

Manchester Explorer, L.P. 
 3,118,077(3) 
 653,511  
 11.36 

Manchester Management Company, LLC 
 3,448,550(3) 
 653,511  
 12.36 

683 Capital Management, LLC 
 1,570,000(4) 
 641,999  
 6.67 

Sio Capital Management, LLC 
 689,352(5) 
 2,786,516(5) 
 9.84 

Directors and Officers: 
    
    
   

James Besser 
 3,593,300(3) 
 788,647  
 13.15 

Paul DiPerna 
 2,553,586(6) 
 330,436  
 8.77 

Kevin Schmid 
 —  
 195,871  
 * 

Duane DeSisto 
 69,891  
 20,833  
 * 

Steven Felsher 
 126,177  
 92,528  
 * 

Morgan C. Frank 
 3,324,303(3) 
 830,969  
 12.45 

Philip Sheibley 
 51,139  
 11,112  
 * 

Carmen Volkart 
 9,585  
 10,558  
 * 

Ellen O’Connor Vos 
 18,519  
 199,353  
 * 

All current directors and executive officers
    as a group (9 persons) 
 6,153,200  
 1,831,661  
 24.77 

 

*Represents
                                            less than 1%

 

(1)Excludes
                                            shares subject to outstanding options, restricted stock units and warrants to acquire common
                                            stock that are exercisable within 60 days of May 31, 2024.

 


56
 

 

(2)Represents
                                            the number of shares subject to outstanding options, restricted stock units and warrants
                                            to acquire common stock that are exercisable within 60 days of May 31, 2024.

 

(3)Includes
                                            (i) 144,750 shares directly held by Mr. Besser, of which: (a) 60,277 shares were received
                                            in exchange for Mr. Besser’s shares as a result of our acquisition of Quasuras; (b)
                                            29,630 shares purchased in a private placement in 2018 (the “2018 Placement”)
                                            and (c) 34,843 shares were purchased in a private placement in 2020 (the “2020 Placement”)
                                            and (d) 20,000 shares were purchased in the open market; (ii) 2,218,077 held by Manchester
                                            Explorer, L.P. of which: (a) 1,515,152 shares were purchased in a private placement in 2017
                                            (the “2017 Placement”), (b) 157,037 shares were purchased in the 2018 Placement,
                                            (c) 11,614 were purchased in the 2020 Placement, (d) 300,000 shares were purchased in a public
                                            offering in February 2022, (e) 234,274 shares were acquired upon the conversion of a convertible
                                            note in February 2022 and (f) 900,000 shares were purchased in the Company’s February
                                            2024 public offering; (iii) 330,473 shares held by JEB Partners, L.P. of which (a) 252,526
                                            shares were purchased in the 2017 Placement, (b) 53,333 shares were purchased in the 2018
                                            Placement and (c) 11,614 shares were purchased in the 2020 Placement; and (iv) 206,226 shares
                                            held by Mr. Frank, which shares were received in our acquisition of Quasuras in exchange
                                            for Mr. Frank’s shares of Quasuras. Mr. Besser, as the managing member, and Mr. Frank,
                                            as the portfolio manager and consultant of Manchester Management Company, LLC, (“MMC”)
                                            the general partner of Manchester Explorer, L.P. and JEB Partners, L. P., have shared voting
                                            and dispositive power over shares held by Manchester Explorer, L.P. and JEB Partners, L.P.
                                            The address for Manchester Explorer, L.P is c/o MMC, 2 Calle Candina, No. 1701, San Juan,
                                            Puerto Rico 00907.

 

(4)Based
                                            on information reported by 683 Capital Management, LLC (“683 Management”) on
                                            Schedule 13G filed with the SEC on February 16, 2024. 683 Management, as the investment manager
                                            of 683 Capital Partners, LP (“683 Capital”), may be deemed to have beneficially
                                            owned the shares of Common Stock and warrants to purchase  shares of Common Stock
                                            beneficially owned by 683 Capital. Ari Zweiman as the Managing Member of 683 Management  may
                                            be deemed to have beneficially owned the shares of common stock and warrants to purchase
                                            shares of common stock beneficially owned by 683 Management. The address for 683 Management,
                                            683 Capital and Mr. Zweiman is 1700 Broadway, Suite 4200, New York, NY 10019.


 

(5)Based
                                            on information reported by Sio Capital Management, LLC (“Sio”) on Schedule 13G
                                            filed with the SEC on February 6, 2024. Sio and Sio GP, LLC (the “GP”) act as
                                            investment advisor and general partner, respectively, to various clients that are the record
                                            owners of the shares of our common stock reported on this Schedule 13G. Because Sio’s
                                            investment discretion with respect to such clients is subject to oversight by the GP, the
                                            GP may be deemed to be the beneficial owner of the common stock of the Issuer owned by such
                                            clients. In addition, both Sio and the GP are controlled by Michael Castor. As such, he may
                                            be deemed to control the voting and dispositive decisions with respect to, and therefore
                                            be the beneficial owner of, the shares of our common stock. The address for Sio, the GP and
                                            Mr. Castor is 600 Third Avenue, New York, New York 10016.

 

(6)Includes
                                            (i) 2,000,000 shares directly held by the Paul DiPerna Irrevocable Trust, (ii) 333,334 shares
                                            directly held by Mr. DiPerna’s adult daughters, Kelsie DiPerna and Alaria DiPerna,
                                            which shares Mr. DiPerna has sole voting power over; (iii) 207,906 shares directly held by
                                            the Paul DiPerna Trust, of which 101,010 shares were purchased in the 2017 Placement and
                                            23,429 shares were acquired upon the conversion off a convertible note in February 2022 and
                                            (iv) 12,346 shares held by Mr. DiPerna. The 2,000,000 shares held by the Paul DiPerna Irrevocable
                                            Trust, 333,334 shares held by Mr. DiPerna’s adult daughters and 73,480 shares held
                                            by the Paul DiPerna Trust that were issued in 2017 to Mr. DiPerna in the Control Block Acquisition
                                            and transferred to such persons in December 2020 by Mr. DiPerna. Mr. DiPerna is the chairman
                                            of our board of directors, and also serves as our president, chief financial officer and
                                            treasurer. Mr. DiPerna is the trustee of both the Paul DiPerna Irrevocable Trust and the
                                            Paul DiPerna Trust.

 
Changes
in Control
 
We
are not aware of any arrangement that may result in a “changes in control,” as that term is defined by the provisions of
Item 403(c) of Regulation S-K.
 
Equity
Compensation Plan Information
 
The
following table shows the number of securities to be issued upon exercise or vesting of outstanding equity awards under the 2017 Plan
as of March 31, 2024.
 


  
Number
    of securities to be issued upon exercise or vesting of outstanding equity awards (a)  
Weighted-
    average exercise price of outstanding options (b)  
Number
    of securities remaining available for future issuance under equity compensation plans (excluding securities
    reflected in column(a)) (c) 

Equity
    compensation plans not approved by security holders 
 3,689,341  
$3.70  
 3,648,651 

 


57
 

 
ITEM
13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Transactions
with Related Persons
 
Below
we describe any transactions to which we have been a participant, in which the amount involved in the transaction exceeds or will exceed
the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and
in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate
family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest
since April 1, 2022.
 
MMC
as the general partner of Manchester Explorer, L.P. (Explorer), combined with the holdings of its affiliates, JEB Partners LP, Mr. Besser
and Mr. Frank, owned approximately 13% of our outstanding shares of common stock at March 31, 2024. Mr. Besser is our chief executive
officer and a managing member of MMC. Mr. Frank is one of our directors, and he serves as the portfolio manager of Explorer and as a
managing member of MMC. In February 2024, we closed a public offering of our common stock (the 2024 Offering), and Explorer purchased
900,000 shares in the 2024 Offering for aggregate gross proceeds to us of $990,000.
 
Mr.
DiPerna’s daughter is an employee of ours, and, during fiscal 2024 and fiscal 2023, we paid her approximately $137,000 and $201,000,
respectively, which includes the aggregate grant date fair value, as determined pursuant to FASB ASC Topic 718, of stock options granted
to her.
 
See
“Management” above for other related-party transactions involving our executive officers and directors.
 
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The
following table shows the fees billed to us by Farber Hass Hurley LLP, or Farber, our independent registered public accounting firm,
for the audit of our consolidated financial statements and other services provided (in thousands).
 


  
Year
    ended March 31, 

  
2024  
2023 

Audit fees(1) 
$63  
$53 

Audit-related fees(2) 
 38  
 6 

Total(3) 
$101  
$59 

 

(1)Audit
                                            fees consisted of fees for professional services rendered for the audit of our annual consolidated
                                            financial statements and reviews of our quarterly consolidated financial statements.

 

(2)Audit-related
                                            fees consisted of fees for services related to our issuance of SEC registration statements
                                            and sales of our securities under registration statements.

 

(3)Farber
                                            did not provide any non-audit or other services other than those reported under “Audit
                                            fees” and “Audit-related fees.”

 
The
Audit Committee meets with our independent registered public accounting firm at least four times a year. At such times, the Audit Committee
reviews and approves both audit and non-audit services performed by the independent registered public accounting firm, as well as the
fees charged for such services. The Audit Committee is responsible for pre-approving all auditing services and non-auditing services
(other than non-audit services falling within the de minimis exception set forth in Section 10A(i)(1)(B) of the Exchange
Act and non-audit services that independent auditors are prohibited from providing to us) in accordance with the following guidelines:
(1) pre-approval policies and procedures must be detailed as to the particular services provided; (2) the Audit Committee must be informed
about each service; and (3) the Audit Committee may delegate pre-approval authority to one or more of its members, who shall report to
the full committee, but shall not delegate its pre-approval authority to management. Among other things, the Audit Committee examines
the effect that performance of non-audit services may have upon the independence of the auditors. 
 


58
 

 
PART
IV
 
ITEM
15: EXHIBITS
 
(a)
Financial Statements and Financial Statement Schedules are set forth under Part II, Item 8 of this report.
 
(b)
 
Other
Schedules may omitted because they are not applicable, not required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
 


Exhibit
 
 
 
Reference
 
Filed
    or Furnished

Number
 
Exhibit
    Description
 
Form
 
Exhibit
 
Filing Date
 
Herewith

1.1
 
Form
    of Underwriting Agreement dated May 15, 2023
 
8-K
 
1.1
 
05/17/2023
 
 

1.2
 
Underwriting
    Agreement dated as of February 15, 2024 between the Registrant and Titan Partners Group LLC
 
8-K
 
1.1
 
02/16/2024
 
 

1.3
 
Sales
    Agreement, dated as of November 22, 2023, between Modular Medical, Inc. and Leerink Partners LLC
 
8-K
 
1.1
 
11/22/2023
 
 

2.1
 
Reorganization
    and Share Exchange Agreement dated as of July 24, 2017, by and among the Registrant, Quasuras, Inc., Paul DiPerna and the other stockholders
    of Quasuras, Inc.
 
8-K
 
2.1
 
07/28/2017
 
 

2.2
 
Addendum
    No. 1 to Reorganization and Share Exchange Agreement dated as of July 24, 2017, by and among the Registrant, Quasuras, Inc., Paul
    DiPerna and the other Stockholders of Quasuras, Inc. dated May 3, 2021
 
8-K
 
2.2
 
05/12/2021
 
 

3.1
 
Third
    Amended and Restated Articles of Incorporation, as filed with the Secretary of State of Nevada on June 27, 2017
 
8-K
 
3.1
 
06/29/2017
 
 

3.2
 
Certificate
    of Amendment to the Amended and Restated Articles of Incorporation of Modular Medical, Inc., filed with the Secretary of State of
    the State of Nevada on November 24, 2021
 
8-K
 
3.1
 
12/01/2021
 
 

3.3
 
Certificate
    of Amendment to the Amended and Restated Articles of Incorporation of Modular Medical, Inc., filed with the Secretary of State of
    the State of Nevada on February 15, 2024
 
 
8-K
 
 
3.1
 
 
02/15/2024
 
 

3.4
 
Amended
    Bylaws
 
10-SB
 
3.2
 
03/08/2002
 
 

4.1*
 
2017
    Equity Incentive Plan, as amended and restated
 
 
 
 
 
 
 
X

4.2
 
Form
    of Warrant to Purchase Common Stock dated February 14, 2022
 
8-K
 
4.1
 
02/14/2022
 
 

4.3
 
Form
    of Pre-Funded Warrant to Purchase Common Stock dated May 2, 2022
 
8-K
 
4.1
 
05/05/2022
 
 

4.4
 
Form
    of Private Placement Warrant dated May 2, 2022
 
8-K
 
4.2
 
05/05/2022
 
 

4.5
 
Form
    of Warrant
 
S-1/A
 
4.5
 
05/05/2023
 
 

4.6
 
Form
    of Underwriter’s Warrant
 
S-1/A
 
4.6
 
05/05/2023
 
 

4.7
 
Description
    of Registrant’s Securities
 
 10-K
 
 4.7
 
 06/26/2023
 
 

10.1*
 
Employment
    Agreement dated August 1, 2018, by and between the Registrant and Paul DiPerna
 
S-1
 
10.4
 
06/27/2019
 
 

10.2
 
Intellectual
    Property Assignment Agreement dated July 24, 2017, by and between the Registrant, Quasuras, Inc. and Paul DiPerna
 
8-K
 
10.3
 
07/28/2017
 
 

10.3*
 
Technology
    Royalty Agreement dated as of July 24, 2017, by and between the Registrant, Quasuras, Inc. and Paul DiPerna
 
8-K
 
10.4
 
07/28/2017
 
 

10.4
 
Standard
    Industrial/Commercial Agreement between the Registrant and Michael Summers dated January 5, 2023
 
S-1
 
10.28
 
04/24/2023
 
 

10.5*
 
Form
    of Indemnification Agreement between the Registrant and each of its directors and officers used from January 23, 2020
 
10-Q
 
10.15
 
02/13/2020
 
 

10.6*
 
Form
    of Notice of Stock Option Grant and Stock Option Agreement under the Amended 2017 Equity Incentive Plan
 
10-Q
 
10.16
 
02/13/2020
 
 

10.7*
 
First
    Amendment to the Employment Agreement between the Registrant and Paul DiPerna effective as of May 12, 2020
 
8-K
 
10.18
 
05/27/2020
 
 

10.8*
 
Second
    Amendment to Employment Agreement between the Registrant and Paul DiPerna effective as of July 1, 2020
 
10-Q
 
10.20
 
08/12/2020
 
 
 


59
 

 



10.9
 
Form
    of Convertible Promissory Note issued in the 2021 Private Placement
 
8-K
 
10.21
 
05/12/2021
 
 

10.10
 
Form
    of Common Stock Purchase Agreement dated March 2020 by and between the Registrant and the Investors named therein
 
S-1
 
10.17
 
04/09/2020
 
 

10.11
 
Form
    of Securities Purchase Agreement for the 2021 Private Placement
 
8-K
 
10.23
 
05/12/2021
 
 

10.12
 
Form
    of Registration Rights Agreement for the 2021 Private Placement
 
8-K
 
10.24
 
05/12/2021
 
 

10.13
 
Form
    of Common Stock Purchase Warrant issued in the 2021 Private Placement
 
8-K
 
10.22
 
05/12/2021
 
 

10.14
 
Promissory
    Note dated October 28, 2021 between the Registrant and Manchester Explorer, L.P.
 
8-K
 
10.27
 
10/29/2021
 
 

10.15
 
Warrant
    Agency Agreement between the Registrant and Colonial Stock Transfer Company, Inc., dated February 14, 2022
 
8-K
 
10.1
 
02/14/2022
 
 

10.16
 
Form
    of Warrant Omnibus Amendment Agreement
 
S-1/A
 
10.31
 
02/07/2022
 
 

10.17
 
Form
    of Securities Purchase Agreement dated May 2, 2022
 
8-K
 
10.1
 
05/05/2022
 
 

10.18*
 
Severance
    and Release Agreement between the Registrant and Ellen O’Connor Vos dated February 23, 2022
 
S-1
 
10.33
 
07/06/2022
 
 

10.19*
 
Offer
    Letter Agreement between the Registrant and Kevin Schmid dated July 13, 2022
 
8-K
 
10.1
 
07/26/2022
 
 

10.20*
 
Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the Amended and Restated Modular Medical, Inc. 2017 Equity Incentive Plan
 
10-Q
 
4.11
 
08/14/2023
 
 

10.21
 
Form
    of Warrant Agency Agreement 
 
S-1/A
 
10.29
 
05/05/2023
 
 

10.22
 
Form
    of Common Stock Purchase Agreement dated October 28, 2021 between the Registrant and the Investors named therein
 
8-K
 
10.29
 
10/29/2021
 
 

10.23
 
Modular
    Medical, Inc. Two-Part FDA Submission and Clearance Milestone Bonus Program
 
8-K
 
10.1
 
10/05/2023
 
 

10.24*
 
Third
    Amendment to Employment Agreement between the Company and Paul DiPerna
 
8-K
 
10.1
 
04/10/2024
 
 

21.1
 
List
    of Subsidiaries
 
 
 
 
 
 
 
X

23.1
 
Consent
    of Independent Registered Public Accounting Firm
 
 
 
 
 
 
 
X

24.1
 
Power
    of Attorney (see signature page of this Report)
 
 
 
 
 
 
 
X

31.1
 
Certification
    of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X

31.2
 
Certification
    of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X

32.1
 
Certification
    of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
X

97.1
 
Compensation
    Recovery Policy 
 
 
 
 
 
 
 
X

101.INS
 
Inline
    XBRL Instance Document.
 
 
 
 
 
 
 
X

101.SCH
 
Inline
    XBRL Taxonomy Extension Schema Linkbase Document.
 
 
 
 
 
 
 
X

101.CAL
 
Inline
    XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
 
 
 
 
X

101.DEF
 
Inline
    XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
 
 
 
 
X

101.LAB
 
Inline
    XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
 
 
 
 
X

101.PRE
 
Inline
    XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 
 
 
 
X

104
 
Cover
    Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 
 
 
 
 
 
 
X

 

*Indicates
                                            a management contract or compensatory plan or arrangement.

 
Item
16. Form 10-K Summary
 
Not applicable.
 


60
 

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 21st day of June, 2024.
 


 
MODULAR MEDICAL, INC.

 
 

 
By:  
/s/
    James E. Besser 

 
 
James E. Besser

 
 
Chief Executive Officer,

 
 
(Principal Executive Officer)

 
POWER
OF ATTORNEY
 
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James E. Besser and Paul DiPerna
as her/his true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution, for her and him and in her
or his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file
the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in- fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
 
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 


Name
 
Title
 
Date

 
 
 
 
 

/s/ James
    E. Besser
 
Chief Executive Officer
 
June 21, 2024

James E. Besser
 
(Principal Executive Officer)
 
 

 
 
 
 
 

/s/
    Paul DiPerna
 
Chairman, President and
    Chief Financial Officer 
    (Principal Financial and Accounting Officer)
 
June 21, 2024

Paul DiPerna
 
 
 
 

 
 
 
 
 

/s/ Duane
    DeSisto
 
Director
 
June 21, 2024

Duane DeSisto
 
 
 
 

 
 
 
 
 

/s/ Steven
    Felsher
 
Director
 
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